Toromont Industries announced Monday it will sell its AgWest Ltd. arm to Dutch equipment distributor Mechan International, effective May 1.

Neither company would disclose the financial terms of the deal Monday, except that it will be in cash and “is not expected to have a material impact on Toromont’s overall future operations, revenue or earnings.”

AgWest operates three dealerships and three parts-and-service satellite locations in the province, handling all Agco’s product lines including Fendt, Massey Ferguson, Challenger, Sunflower, White, Rogator, TerraGator and Wilmar. It also holds exclusive rights to distribute Claas combines in the entire province.

The AgWest network includes its head office location at Elie, about 30 km west of Winnipeg, plus its dealerships at Brandon and Neepawa and satellite locations at Swan River, Morden and Russell.

Mechan plans to continue to operate the business under the AgWest brand and retain the current management, staff and number of sites, Toromont said.

“Mechan’s global presence, deep agricultural knowledge, and solid distribution reputation offer a strategic fit with AgWest’s people, customers and suppliers,” Toromont said.

“Thanks to the dedicated AgWest team, loyal customers and strong supplier support, the AgWest business has improved consistently over the past few years,” Toromont CEO Scott Medhurst said in a release.

Concord, Ont.-based, publicly traded Toromont created AgWest in 2014, when it bought two Manitoba ag dealership chains and merged them under the one banner.

In its 2022 annual report, Toromont said AgWest “benefitted from a recovery in commodity prices and strong execution leading to higher market penetration and growth in combine and tractor market shares.

“Improved operational execution and added customer deliverables contributed to much improved overall performance,” the company said.

Mechan is an arm of Zweegers Equipment Group, a Dutch investment firm focused on equipment. Toromont noted Zweegers has a “long association with agricultural equipment including the distribution of Agco and Claas products worldwide.”

“This acquisition aligns with our aim to expand the geographical footprint and add new equipment brands,” Mechan board member Ronald Slaats said in that company’s release.

“For us, people, and local entrepreneurship are paramount, we share our ‘boots on the ground’ approach and deep-rooted passion for equipment, working towards a sustainable future. We are convinced that AgWest’s culture and working methods are in complete harmony with this,” Zweegers CEO Gerrit van der Scheer said in the same release.

Agco’s Americas vice-president for distribution, Bill Hurley, said in a separate release Monday that Mechan’s ownership of AgWest would bring “expanded capabilities, investment and international perspective to the table.”

Mechan’s resources, he said, offer “substantial growth opportunities for Agco products in Manitoba, especially for our Fendt brand as it continues its very successful expansion into the region.” — Glacier FarmMedia Network

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Many firms have idled operations in Russia after it invaded Ukraine last week, resulting in powerful Western sanctions.

Cummins has an office in Moscow. In 2006, Cummins entered an agreement with Russian truck maker Kamaz Inc. to produce engines for the company’s fleet of trucks, buses and other heavy machinery.

Cummins did not respond to a request for comment on its relationship with Kamaz, which is 47 per cent owned by Russian state conglomerate Rostec and supplies parts to Russian military vehicles.

Shares of Cummins were down 0.6 per cent in late afternoon trading, in line with Wall Street’s main indexes as investors digested the sanctions against Russia.

Russia’s invasion of Ukraine was the biggest attack on a European state since the Second World War. Russia calls its actions in Ukraine a “special operation.”

Other U.S. manufacturers including Deere and Co. and Caterpillar have distribution and manufacturing facilities in Russia. Deere, the world’s largest farm equipment maker, opened a manufacturing and parts distribution plant near Moscow in 2010. It was the company’s largest single investment in more than 100 years of doing business in Russia.

Deere didn’t specify how its business will be impacted, but said in an emailed statement it will “fully abide by U.S. and international sanctions.”

Caterpillar did not respond to a request for comment.

— Reporting for Reuters by Bianca Flowers.

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The reason: steel prices jumped right after U.S. President Donald Trump announced tariffs.

Throughout U.S. farm country, where Trump has enjoyed strong support, tariffs on steel and aluminum imports are boosting costs for equipment and infrastructure and causing some farmers and agricultural firms to scrap purchases and expansion plans, according to Reuters’ interviews with farmers, manufacturers, construction firms and food shippers.

The impact of rising steel prices on agriculture illustrates the unintended and unpredictable consequences of aggressive protectionism in a global economy. And the blow comes as farmers fear a more direct hit from retaliatory tariffs threatened by China on crops such as sorghum and soybeans, the most valuable U.S. agricultural export.

A+P Grain Systems in Maple Park, Illinois — the seller of the storage bin Strom wanted to buy with a neighboring farmer — raised its price two days after Trump announced aluminum and steel tariffs on March 1 to protect U.S. producers of the metals. Strom and his neighbour backed out.

“Would that price destroy us? No,” Strom said. “But these days, you have to be smart about your expenses.”

The metals tariffs also hitting makers and sellers of farm equipment, from smaller firms like A+P Grain to global giants such as Deere and Caterpillar. Such firms are struggling with whether and how to pass along their higher raw materials costs to farmers who are already reeling from low commodity prices amid a global grains glut.

The world’s two largest economies have threatened each other with tariffs on tens of billions of dollars of goods recent weeks.

Trump imposed tariffs of 25 per cent on steel and 10 per cent on aluminum in a move mainly aimed at curbing imports from China. He has since temporarily excluded the European Union and six other allies from the duties and given them until May 1 to negotiate permanent exemptions.

A+P Grain president Dave Altepeter said the steel used in their bins is made in the U.S., but domestic steel prices also have soared because of the tariffs.

U.S. steel mills typically adjust their prices once a year, normally in the first quarter, Altepeter said. But this year, those prices have jumped four times, he said.

The price of steel used in A+P’s grain bins has jumped about 20 per cent since January 1.

“Any time there’s any type of negative talk that affects the steel mill, they’ve raised the price,” said Altepeter.

Last year, about 95,000 tons of steel were shipped to the agriculture industry, compared to the 14 million tons for the U.S. auto industry, according to the American Iron and Steel Institute, an industry group.

Other factors had been driving up steel prices before the recent trade disputes, including an improving global economy and accelerating manufacturing and construction, particularly in the U.S.

The White House referred questions from Reuters to the U.S. Department of Agriculture, which did not respond to a request for comment. Trump and Agriculture Secretary Sonny Perdue have vowed the U.S. government will protect farmers from China’s tariffs, but not explained how.

U.S. farmers can ill-afford any loss of sales. Farm income has dropped by more than half since 2013, following years of massive harvests that have depressed prices for staples such as corn and soybeans.

U.S. competitors Brazil, Argentina and Russia have all raised grain output in recent years, eating into the U.S. share of global markets. Mexico imported ten times more corn from Brazil last year and is set to buy even more in 2018 on worries that renegotiations of the NAFTA trade pact could disrupt their U.S. supplies.

Strom said he has also pushed back plans to build a new metal storage building to house his planter and the combine head he uses for harvesting corn and soybeans. Other farmers, food producers and beer makers have scrambled to finalize deals for steel-based equipment before prices climb more.

Construction postponed

In Riverton, Illinois, farmer Allen Entwistle said he postponed construction of a new $800,000 storage system for grain after Agco’s GSI unit increased prices by 15 per cent.

Entwistle, who voted for Trump, will instead store corn in bags on the ground.

“President Trump keeps telling us he’s going to get a better deal,” Entwistle said. “When are we gonna make it better?”

Agco said Trump’s tariffs will raise its costs and make price hikes to customers unavoidable.

“As the entire grain storage industry has weathered increased steel prices, Agco and GSI are constantly looking for new ways to maximize efficiency and minimize the impact to customers,” said spokeswoman Kelli Cook.

Other companies, including Deere and Caterpillar, are also facing pain from rising steel prices, which account for about 10 per cent of equipment manufacturers’ direct costs.

Deere CEO Samuel Allen told Reuters last month the company will have to absorb the price increase and cut costs elsewhere. China’s threatened tariffs on U.S. crops could hurt the company even more by undermining demand from farmers, he said.

“This has a huge effect on livelihood of the farmer right now, and at the same time it has a huge impact on manufacturers,” said Dennis Slater, president at the Association of Equipment Manufacturers, an industry group.

U.S. net farm income is forecast to drop to $59.5 billion in 2018 dollars, down from $64.9 billion in 2017, an 8.3 per cent decline, according to USDA (all figures US$).

Tariff ‘doom-and-gloom’

In Sheffield, Iowa, Sukup Manufacturing has seen steel prices soar 40 per cent since November, said Brent Hansen, the company’s commercial accounts manager.

The maker of grain bins and pre-manufactured steel buildings has encouraged customers to buy quickly before prices jump more. But some have already postponed projects, Hansen said.

“That’s obviously a big price increase for an industry that’s a little bit doom-and-gloom over tariffs,” Hansen said.

Sukup used to give customers up to two months to consider its bids for projects. Now, it allows just a week in some cases because of volatile steel prices, Hansen said.

Prices have jumped by 25 per cent for thermal insulated panels that keep food cold — which can use either steel, aluminum or both, said Glenn Todd, owner of Todd Construction Services. The company has built food processing and storage facilities for Bumble Bee Seafoods and poultry company Foster Farms.

Richard Adkins, director of sales at Discovery Designs Refrigeration in Mukwonago, Wisconsin, thought his company wouldn’t have to worry about Trump’s tariffs. Most of the metal they use to design industrial refrigeration systems comes from Canada and Mexico, he said, and the president has exempted both countries from the levies.

It didn’t matter. Price-hike notices from vendors landed in Adkins’ mailbox days after Trump announced the duties.

“There’s this knee-jerk reaction,” Adkins said. “We’re quoting prices for projects that won’t be awarded for another six or eight months, and no one wants to be hung out to dry.”

— Reporting for Reuters by Tom Polansek in Chicago and P.J. Huffstutter in Kane County; additional reporting by Rajesh Kumar Singh in Chicago.

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Through the deal, Concord, Ont.-based Toromont will acquire Hewitt’s 45 Caterpillar dealerships in Quebec, the Maritimes, Labrador and Ontario, increasing the number of Toromont’s heavy equipment dealerships to 120.

Toromont will pay Hewitt $917.7 million in cash and 2.25 million Toromont shares, the company said.

Toromont said the acquisition, which is expected to close by mid-October, will add to net earnings next year.

The company will fund the deal through cash on hand and debt.

Hewitt is the authorized Caterpillar equipment dealer for Quebec and western Labrador. Atlantic Tractors and Equipment, which Hewitt has owned since 1995, is the Cat dealer for New Brunswick, Nova Scotia and Prince Edward Island.

“The decision to sell the business founded 65 years ago by my father has not been an easy one, but is the outcome of much reflection on the part of my son David and me,” Hewitt CEO Jim Hewitt said in a release.

Combining Hewitt with Toromont’s operations in Ontario, Manitoba, Newfoundland, Labrador and Nunavut “creates the foundation for an even more competitive position in the natural resource, infrastructure and construction industries in Canada,” the companies said.

Privately-held Hewitt, headquartered in the Montreal area at Pointe-Claire, employs over 2,000 people across the East.

— Reporting for Reuters by Ahmed Farhatha in Bangalore. Includes files from AGCanada.com Network staff.

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The Internal Revenue Service (IRS) has challenged the company’s taxes for the years 2007-2012, the company said in a statement on Friday.

“We disagree with the IRS’ position, have co-operated for requests for information,” Caterpillar said.

A New York Times article on Tuesday said a report commissioned by the U.S. government accused the company of carrying out tax and accounting fraud.

“I believe that the company’s noncompliance with these rules was deliberate and primarily with the intention of maintaining a higher share price. These actions were fraudulent rather than negligent,” said Leslie Robinson, an accounting professor and the author of the report, according to the Times article.

Caterpillar said it had received the report on Thursday and was reviewing it.

— Reporting for Reuters by Arunima Banerjee in Bangalore.

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A spokeswoman for the U.S. Attorney Office for the Central District of Illinois, Sharon Paul, confirmed that federal law enforcement officials conducted searches at locations in Peoria, East Peoria and Morton, Illinois, but did not say why federal agents raided the three locations.

Caterpillar, in a statement issued on Thursday afternoon, said that the search may be related to an Internal Revenue Service investigation on profits earned by a Swiss subsidiary.

The company said that “while the warrant is broadly drafted, we believe the execution of this search warrant is regarding, among other things, export filings that relate to the CSARL matter first disclosed in Caterpillar’s Form 10-K filed on February 17, 2015, and updated in Caterpillar’s most recent Form 10-K filed with the SEC on February 15, 2017.”

Agencies involved in the search included the IRS’ Criminal Investigation Division, the U.S. Department of Commerce’s Bureau of Industry and Security’s Office of Export Enforcement, and the Federal Deposit Insurance Corp.’s Office of Inspector General, Paul said.

Officials at the agencies could not be reached for comment.

Caterpillar shares fell 4.3 per cent to close at $94.36 on the New York Stock Exchange after trading as low as $92.84 (all figures US$).

IRS seeks $2B

Caterpillar is fighting an Internal Revenue Service demand that the company pay $2 billion in taxes and penalties for profits assigned to a Swiss parts distribution subsidiary, Caterpillar SARL (CSARL), according to filings with the Securities and Exchange Commission.

That subsidiary was also the subject of a 2014 Senate committee report that concluded Caterpillar shifted billions in profits abroad and had $2.4 billion in taxes deferred or avoided from 2012.

“As a result of those licensing and servicing agreements, over the next thirteen years from 2000 to 2012, Caterpillar shifted to CSARL in Switzerland taxable income from its non-U.S. parts sales totaling more than $8 billion, and deferred or avoided paying U.S. taxes totaling about $2.4 billion,” the report said.

Caterpillar, in its 2016 annual report, said it is “vigorously contesting” the IRS demand. “We believe that the relevant transactions complied with applicable tax laws and did not violate judicial doctrines,” it stated.

Caterpillar also disclosed in its report that it had received grand jury subpoenas from the U.S. District Court for the Central District of Illinois seeking documents and information related to the movement of cash among U.S. and non-U.S. subsidiaries, and the purchase and resale of replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, including Caterpillar SARL.

Caterpillar said it is co-operating with the investigation and did not believe it would have a material impact on its finances.

The facility in Morton, according to the company’s website, is responsible for receiving and shipping replacement parts to parts facilities and Caterpillar dealers worldwide.

Seven people, all wearing dark-coloured jackets marked either “IRS special agent” or “Police federal agents,” entered the Caterpillar headquarters, according to a video posted by the Peoria Journal Star. Several of the agents were armed, while others were pulling large black roller bags as they entered the building.

Caterpillar reported sales fell 18 per cent in 2016 to $38.5 billion and since late 2015 it has shrunk its workforce by more than 16,000 employees and consolidated or closed 30 facilities. Caterpillar cut 12,300 jobs in 2016, including 7,700 in the U.S.

It said it was considering closing two more major production facilities, including one in Aurora, Illinois, and also announced it was moving its corporate headquarters from Peoria to Chicago this year.

— Reporting for Reuters by Timothy Mclaughlin, PJ Huffstutter and Tracy Rucinski in Chicago, David Shepardson in Washington and Joe White in Detroit; writing by Daniel Grebler.

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Hewitt Equipment — the authorized Cat dealer for Quebec and western Labrador and, through its Atlantic Tractors and Equipment arm, for the Maritimes — announced recently it will sell its ag division to Groupe Symac for an undisclosed sum.

Symac — which is co-owned by La Coop Comax and La Coop Parisville and operates dealerships at St-Denis-sur-Richelieu, St-Hyacinthe, Parisville, St-Bruno and Normandin — will get Hewitt’s Rougemont, Napierville and Pont-Rouge dealerships.

Symac said it will continue its distribution of Agco brands, including Massey Ferguson, Challenger, Fendt, White and Sunflower. However, the expanded chain will no longer handle Claas combines or forage harvesters, nor “several other” shortline brands.

Representation for Claas and the shortline brands is to be “transitioned” to new dealers, yet to be appointed, Hewitt and Symac said.

A team of Hewitt and Symac staff is now working “to ensure a smooth transition aimed at assuring that our customers’ needs continue to be met with little or no disruption to their operations,” Hewitt CEO Jim Hewitt said in the company’s release.

Hewitt chief operating officer Stephane Guerin said the company will still serve farming customers in the market for Cat products such as skid steers, backhoes, lift trucks, tractors, hydraulic excavators, generators and vocational trucks.

Moving the ag business to Symac follows an “in-depth review” of Hewitt’s direction and “assessment of the added value” the company can bring to farming customers, the company said.

Pointe-Claire-based Hewitt said it sought a partner who’s “more closely aligned with and focused on the industry’s needs related to specialized equipment designed solely for or primarily for agricultural applications.” — AGCanada.com Network

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