Precision farming technology company Raven Industries is being acquired by CNH Industrial. The deal shows the potential of agriculture-tech to change farming. It might mean more competition for Deere, too, although Deere investors should cheer the deal.

Raven (ticker: RAVN) shares are up 50% in midday trading, to $57.77. The stock closed on Friday at $38.62.

CNH Industries (CNHI) is paying $58 a share in cash. The fact that the stock is so near the deal price indicates investors expect that to be very close to the final offering and that the deal won’t run into any regulatory hurdles.

Raven makes equipment that helps farmers be more efficient by automatically controlling things such as tractor steering or fertilizer application from a sprayer. Farmers adopt technologies like those because it lowers costs and raises crop output. Famers have been adopting precision technologies for years, and Deere (DE) is among the leaders in the precision agriculture space.

Being part of CNH will give Raven a wider universe to sell into. “We are incredibly excited to collaborate in bringing our customers more integrated precision and autonomous solutions,” said CNH CEO Scott Wine in the company’s news release. “Together, our teams will create a stronger business for our employees, dealer network, and customers, enabling us to shape the future of agriculture, augment our world-leading sustainability credentials, and maximize our growth opportunities.”

Deere investors shouldn’t worry, though. Deere is a leader in its own right and farmers with Deere equipment tend to adopt Deere technology. What more, the valuation shows that precision agriculture is a growth business.

“The transaction underscores the importance of developing and integrating precision/AI/autonomous technologies while also serving as a reminder of [Deere’s] differentiated technology suite and the impact it has on the company’s competitive position,” wrote Baird analyst Mig Dobre in a Monday report. He points out that CNH is paying a lot for Raven despite only half of its sales coming from precision agriculture equipment. He views Deere as the precision-ag leader.

CHH is paying about 50 times estimated 2021 earnings for Raven. CNH trades for about 15 times estimated 2021 earnings. Deere trades for about 17 times estimated 2021 earnings. The S&P 500 trades for about 22 times estimated 2021 earnings.

Deere, and CNH, won’t suddenly trade for 50 times earnings. Precision agriculture is only a portion of the business and CNH is also basing its price on some cost and revenue synergies common when a big firm buys a smaller firm. Still, the purchase shows there is more growth for precision agriculture.

Investors seem to feel that way. Deere stock is up 2.2% in midday trading. The S&P 500 and Dow Jones Industrial Average, for comparison, are up 1.2% and 1.7%, respectively.

Wall Street deserves some credit Monday as well. Three analysts covered Raven. All three rated the shares a Buy. The average analyst price target coming into Monday was about $51 a share. The entire company is being bought for $58. The take out price is a premium to that, but all the analysts seemed to recognize the potential before the deal came.

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