TAFE recently filed an amended 13D report to the American Securities and Exchange Commission (SEC) by TAFE in which it expressed concerns about the corporate governance of AGCO.
The Indian company holds a 16.3% shareholding in AGCO, and its chair and managing director, Mallika Srinivasan, serves as a non-independent director of the American corporation.
AGCO has responded with a statement about the situation in which it robustly refutes the complaints made within the amendment and goes on to explain why, in April, it terminated the commercial agreement it had with TAFE.
AGCO has stated that the decision followed extensive discussions with TAFE over many years, concerning what it alleges are TAFE’s continued poor operational performance as a supplier, brand licensee and distributor to AGCO.
The discussions were held at multiple levels of the organization over the years and these included Srinivasan, yet, despite assurances from TAFE that the issues would be addressed, AGCO claims there was no meaningful progress.
AGCO taken to court
TAFE has since commenced litigation against AGCO in India, resulting in the Chennai Court allowing it to continue selling tractors under the name of Massey Ferguson, regardless of the termination of the trademark agreement, although how long this has been granted for is unclear.
A major complaint of TAFE, is that of the composition of the corporation’s board which it believes would benefit from a shake up to restore a level of oversight and accountability to ensure that the board is truly independent from management.
In response, AGCO stated that replacing independent directors with TAFE’s hand-picked nominees would serve only to assist in prioritising the interests of TAFE and its operations above the interests of AGCO’s other shareholders.
Long lawsuits feared
Over in Duluth, Georgia, the board also finds itself disappointed by the prospect of long drawn out litigation with TAFE over what it considers a purely commercial decision, noting that the mutual share ownership of the two companies is a separate issue, even though AGCO’s ownership of TAFE amounts to 21% of its shares.
Another concern raised by TAFE, is the poor financial performance of the American giant, and it draws attention to the 33% fall in the share price over the past year.
In turn, AGCO noted that 2023 saw the corporation enjoy a record net sales income of $14.4 billion. It is fair to note that both John Deere and CNHi have also suffered large falls in their respective share prices.