John Buhler’s parents’ farm was seized by Soviet communists. Now, almost a century later a different breed of Russian has come to Manitoba, this time to pay for what they want.
“I find that rewarding,” said the tractor manufacturer.
Buhler gave preliminary agreement to the Rostselmash company to buy first a majority stake in his company and then up to 80 percent for $7.50 and $7.60 per share by 2012.
Buhler manufactures tractors in Manitoba. The company has a tough time competing against the big farm equipment manufacturers, whom it accuses of predatory price cutting and of keeping Buhler tractors out of farm equipment dealers’ lots.
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Buhler has been hopeful about the eastern European market so he bought some land in Ukraine, planning to set up a tractor factory there. That is when the company began talking to Rostselmash, which has a major factory in Rostov-on-Don that turned out 5,200 combines in 2006, according to Russian newspaper Kommersant.
The company’s website says it has manufactured more than 2.5 million pieces of farm machinery since 1929 and has sold equipment to 48 countries.
“There’s no other agricultural equipment supplier that can even come close to this figure within the next decade,” said the website.
It added: “Efficient, reliable and affordable – these are the words to describe the formula according to which all the equipment bearing the proud name Rostselmash was built.”
Buhler said being absorbed by a Russian company will be a kind of homecoming.
“I always wanted to set up a factory there because my grandfather had a factory there,” Buhler said.
The Russian company was interested in what Buhler was doing because it doesn’t manufacture tractors. Buhler thought the company was only interested in supplying parts for a Buhler tractor factory, but on a visit to Manitoba, Rostselmash made Buhler a written offer for the company.
Buhler said he was surprised, but the deal made sense to him.
“I think it’s positive because they have a worldwide marketing organization. They need a tractor to complete their line of equipment,” said Buhler.
“They expect they can give a 25 to 30 percent increase in production, and it allows me to retire.”
At $7.50 per share, the price is well above the company’s recent market price of $4.90 per share, but the deal drew the scorn of Globe and Mail business columnist Fabrice Taylor.
Taylor said the deal makes sense for Buhler personally because he will be able to sell out and retire in a tax-efficient manner.
However small shareholders aren’t well served by accepting a deal that will be paid out over a number of years, and which does not seem to be the beginning of an equity auction for the company, the columnist wrote.
Often companies that face a takeover bid attempt to find other potential buyers to ensure the winning bid is the best possible.
Buhler and his family own 78 percent of the company and employees own another 10 percent.
He said he won’t benefit more than other shareholders because his shares are common shares like everyone else’s.
But he added that he wants all shareholders to agree to the deal, even though he doesn’t need minority shareholder approval to consummate it.
“If all the shareholders opposed it, then I think I would probably let the deal die, and it would go back to a $4.90 share price, and I’m OK with that,” he said.
Buhler said prairie farmers will benefit from the deal because it will make his company stronger with Rostselmash’s backing. If his company was bought by an American major, most of the operations would probably be transferred to somewhere in the United States.
“The Russians have to pretty well keep it here because they can’t move it to Russia,” he said.
