Agnellis’ CNH plans future exit from construction equipment

CNH Industrial NV agreed to sell 70% of its construction equipment business to a unit of Japan’s Kobe Steel, creating a path for an eventual exit from those product lines for the Agnelli family-backed machinery maker.

CNH, controlled by the family’s Exor NV holding company, will receive $700 million in cash, minus adjustments, and retain 30% of a new joint venture with Kobelco Construction Machinery Co., according to a statement Monday. The deal values the CNH unit at about $1 billion including debt.

The sale will leave CNH, once part of the Fiat automotive group, focused entirely on its agricultural equipment business, which sells Case IH and New Holland tractors and is about four times larger than construction. The transaction follows a broader reshaping of the Agnelli empire under Exor Chief Executive Officer John Elkann.

CNH’s US-traded shares rose as much as 13% on Monday, the biggest intraday gain since early August. Its market value was just over $16 billion.

Exor has previously disposed of truck and tank maker Iveco Group, newspaper publisher GEDI Group, insurance and other smaller companies. Its biggest holdings include Ferrari NV, Fiat owner Stellantis NV and medical equipment maker Philips NV. Exor has 45.6% of CNH’s voting rights.

After a three-year lockup, CNH’s remaining 30% stake will be subject to a put-and-call arrangement that will allow the company to eventually transfer full ownership to Kobelco, Chief Executive Officer Gerrit Marx said to analysts on a call.

CNH’s agriculture dealers will continue to distribute construction machinery supplied by the new venture, while Kobelco dealers won’t sell CNH agricultural equipment.

The sale should give CNH more capacity to invest in agricultural technology while improving its margin profile, according to Bloomberg Intelligence analysts Christopher Ciolino and Sashank Sindhia. While the $1 billion valuation looks modest, exiting control of a smaller, lower-margin business could sharpen capital allocation and support a potential rerating, they added.

CNH separately reported third-quarter adjusted net income of $205 million, nearly doubling from the year-ago period. Revenue was little changed at $4.35 billion. The company raised its full-year forecast for industrial free cash flow to a range of $300 million to $450 million, and lifted giidance for adjusted earnings per share to 44 cents-48 cents.

The agreement with Kobelco Construction, which focuses on earthmoving equipment, also rejoins two companies that had a decade-long partnership for excavators that was called off in 2012.

CNH and Iveco were part of the same company until a 2022 breakup. It said it will use proceeds from the deal to reduce debt. The transaction is expected to close by the end of 2027, subject to regulatory approvals.