Late in April, AGCO announced that it would be terminating its business relationship with TAFE (Tractor And Farm Equipment) of India, at the beginning of May.
This was a surprise move which seems to have caught the financial world off guard with no reason being given by AGCO, although, it has long been rumoured that the corporation was less than enthusiastic about TAFE’s 16% shareholding.
AGCO itself, owns 21% of TAFE shares.
Besides the mutual ownership of each others’ shares, the companies have a strong trading partnership, with AGCO spending $171 million on TAFE tractors and components in 2023.
TAFE, in turn, had purchased around $3.6 million worth of components from AGCO in the same year.
What is more significant from TAFE’s point of view, is that the termination of the agreement includes the licencing of the Massey Ferguson brand in India.
Court proceedings
On hearing the news, TAFE immediately went to court to obtain a status quo order against AGCO to protect against what it termed “unilateral and arbitrary action by AGCO”.
This was an attempt to protect an agreement had been in existence since 1994.
On April 28, the Chennai commercial court upheld the request, ensuring that the contract must continue as it stood immediately before AGCO issued its statement.
In its plea, TAFE also alleged that AGCOs action was “done with malicious intent”.
The company further argues that AGCO’s decision would likely cause harm to TAFE’s business in India, and it was therefore entitled to seek damages as well.
There has been little news since, and unless there is some agreement reached behind closed doors, there is every chance of a long drawn out court battle.
Acrimony intensifies
The disharmony between the two companies has a long and convoluted history that dates back at least 10 years, when there was understood to have been an agreement reached between the AGCO board and Mallika Srinivisan, chair and CEO of TAFE tractors – a company founded by her grandfather in conjunction with Massey Ferguson in 1960.
According to reports in the financial sphere, it is generally accepted that over 10 years ago, Srinivisan had agreed to limit the TAFE shareholding in AGCO to either 12 or 12.5%, the actual figure was never made public.
With the published shareholding now being well above that number, and Ms Srinivisan holding a seat on the AGCO board, there is ample opportunity for friction to arise between the two parties and indeed, evidence has surfaced that not all is well.
Four years ago, she turned her attention on the corporate governance of AGCO, insisting, amongst other things, that the directors are rotated on a more regular basis, and while AGCO did indeed review its overall appointment strategy, it felt it necessary in 2021 to publicly clarify its position and answer various statements made by TAFE concerning the situation.
TAFE given no notice
The latest falling out is compounded due to its suddenness and it being apparent that despite Srinivisan attending an AGCO board meeting on the April 25, she was unaware that such a move was pending until AGCO released its statement of intent the following day.
The company is the second largest manufacturer of tractors in India with sales of 11,200 units in February of 2023, although they range only from 24 – 100hp.
TAFE tractors are available in the UK under its own name, although they carry the same shape and styling as MF models.
This is unlikely to change unless TAFE decides to further differentiate itself.
Although it has been closely associated with the Massey Ferguson brand, it develops its own tractors and showed both hydrogen and battery powered prototypes at Agritechnica, although neither is likely to go into production in the near future.