The dispute between TAFE and AGCO has taken a new and dramatic turn, with TAFE entering what is known as a Schedule 13D filing with the American Securities and Exchanges Commission.
This might appear a rather esoteric event, with little impact at ground level, but such a move can be harbinger of greater things to come, such as a takeover bid, which, should it happen in this case, would most likely be hostile.
A Schedule 13D filing is required within 10 days of an individual or organisation acquiring 5% or more of a traded company’s stock, thus granting some transparency to company’s ownership, as it is a public document.
An original filing will also need amending if further shares are purchased, or companies modify the reason for purchasing the shares in the first place.
This information has to be included at the time, and it is this which appears to have prompted the latest amendment.
Due to this requirement, they may also be used to fire the first shots in takeover battles, as well as give an insight into the ownership of companies, and this latest document is no exception.
Details revealed
From the filing, we learn that between TAFE, TAFE Motors and Tractors Ltd and Mallika Srinivasan, the Indian company and its CEO own 16.3% of AGCO, granting Ms. Srinivasan considerable voting power in the AGCO boardroom.
Yet, it would appear that this is not enough clout to push through the reforms that TAFE would like to see take place within the higher echelons of AGCO management, and the document details its dissatisfaction.
The main takeaways from the amendment are concerns with AGCO’s financial performance, referencing a 33% fall in share price over the last year.
TAFE also noted what it considers billions wasted in bad deals and the maintenance of poor governance practices as well as a weak financial performance.
To address these issues, TAFE is actively exploring all of its options, including the replacement of certain board members through consent or via litigation in a bid to preserve “the rights and investments of all of the Issuer’s shareholders, and also to ensure that the board and its leadership are held accountable”.
TAFE fights back
These are well rehearsed issues that the business world has been aware of for some time, what is new, however, is the move by AGCO to cease trading with TAFE, which it announced back in April.
TAFE is AGCO’s largest shareholder and in its 13D amendment, the Indian company noted that a decade old agreement to cooperate in the “spirit of long-term strategic investment and partnership” was extended by a year at a board meeting in April.
Two days after the pact was settled upon, the AGCO board pulled the plug on it, causing TAFE to initiate legal proceedings in India to preserve its business. What happens next, is within the realm of speculation.
TAFE is determined to continue trading as Massey Ferguson in India and throughout Asia, and one way of ensuring this is to purchase a controlling share of AGCO, which is presently capitalised at around $7.6 billion.
If the stock market considered it likely, the share price would most probably have rallied, yet over the past five days, it has dropped 8% and shows no sign of recovery, further underlining TAFE’s complaint.
