Trouble in Paradise: Why are Tafe and AGCO fighting over Massey Ferguson?

Tafe and AGCO have been allies for 64 years. Tafe is the single largest shareholder in AGCO and AGCO holds nearly 21% in Tafe

“Ghee khao desi, aur chalao Massey.” This is the advertising line that would come to mind for several Indians at the mention of tractor brand Massey Ferguson. However, the story of the brand, currently at the centre of a dispute between Tractors and Farm Equipment (Tafe) and United States-based AGCO Corporation, goes much beyond the advertisement.

It symbolises the grit, dreams, determination, and passion of a young India in the 1960s that tried to ensure that the agricultural sector, on which 80 per cent of the country depended for their earnings at that time, was modernised. According to available data, the country had hardly 37,000 tractors in 1960, all imported and mostly war-surplus products. Even today, tractor sales are a key indicator of the agricultural and rural economy. 

It was on January 1, 1961, that the founder of the Amalgamations Group, Sivasailam Anantharamakrishnan, fondly called J, started an office for Tafe on Kothari Road to manufacture Massey Ferguson tractors in India. Thus began the story of Tafe and one of the longest-standing trademark tie-ups.

J's legacy was carried forward by his son, Anantharamakrishnan Sivasailam and now by granddaughter Mallika Srinivasan (Anantharamakrishnan Sivasailam's daughter).

Tafe is the single largest shareholder in AGCO, the third largest farm equipment manufacturer in the world after Deere & Company and CNH Industrial. Yet, on Monday, AGCO announced termination of its agreements with Tafe, including the brand licence for Massey Ferguson tractors.

“Tafe is no longer an approved licensee, user, distributor, or seller of Massey Ferguson products,” the US company said, adding that the termination was due to inappropriate and unauthorised actions by Tafe.

This occurred despite legal relief being in place for Tafe following a similar notice in April 2024. Consequently, the Chennai-based company has again approached the local court with a contempt petition against AGCO. In April, Tafe had argued that the termination was executed without notice. 

 

Why the war

Tafe was founded as a joint venture between Massey Ferguson, a part of the AGCO Group, and Amalgamations in 1960. It was only in 1974 that the two companies first entered into a trademark agreement for tractors. This deal was further expanded in 1994, granting Tafe exclusive right to use the Massey Ferguson (MF) brand name for its tractors in India.

Tractors comprise more than 85 per cent of Tafe’s revenues, with the rest coming from engine sales and service, gears, engineering plastic components, and other products, says a CRISIL report from last year. 

By early 2024, Tafe held MF brand rights for India, Nepal, Sri Lanka, Bangladesh, and Bhutan. Since 2012, Tafe, under Srinivasan’s leadership, took a leap from being just a trademark holder of MF to becoming the single largest shareholder in AGCO, now holding a 16.3 per cent stake in the company.

By March 2023, Simpson & Co, a holding company of the Amalgamations group, owned 79.3 per cent of Tafe, while AGCO had the rest 20.70 per cent. Tafe’s annual turnover is reportedly around Rs 12,500 crore. The US company’s annual net sales in 2023 stood at $14.4 billion. Based on the current market capitalisation of $7.35 billion for AGCO, Tafe shares in it are valued at around $1.19 billion. 

The termination episode is seen to have elements of a boardroom battle dating back to 2021. A tussle has been going on between AGCO’s management and Tafe, which wants a board restructuring and strategic transformation.

With the conflict intensifying on Monday, Tafe approached US shareholders through a letter stating that its “pragmatic suggestions” for growth had been ignored. “In response, AGCO management took measures to disenfranchise Tafe and isolate its representative on the board,” it said. 

AGCO describes Tafe’s actions as a “self-serving campaign”.

Srinivasan is Tafe’s representative on AGCO’s 10-member board. None of the other current directors owns more than 1 per cent of the company’s shares. Tafe believes that since Eric Hansotia assumed both the Chairman and Chief Executive Officer’s roles in 2021, the company has suffered.

“To make matters worse, combining these roles appears to have compromised the board’s ability to effectively oversee management and hold Hansotia accountable,” Tafe’s letter said. It pointed out the company’s share price had dropped by approximately 19 per cent over the past year (as of Monday), while its proxy peers’ shares had increased by an average of 14 per cent.

Tafe believes AGCO is not allowing shareholders to take action to protect their investment or “break glass in case of emergency”.

Why brand MF matters

According to data from the Federation of Automobile Dealers Associations, the Indian tractor market saw annual sales of 892,313 units in 2023-24, posting an impressive 7.5 per cent growth. Of this, around 12 per cent were from Tafe (see chart).

The Massey Ferguson brand adorns more than 55 per cent of Tafe’s 180,000 tractors in a year, including exports. Tafe exports tractors to more than 80 countries. In 2016, exports used to generate 13 per cent of its tractor sales but dipped to 8 per cent due to economic headwinds in the key markets of Turkey and Africa and other markets in Asia, besides a partial slowdown in the US market, where tractors are sold through AGCO, says the CRISIL report. 

Tafe has a strong distribution network of more than 2,000 dealers supporting its tractor brands: Tafe, Eicher Tractors, and IMT, in addition to Massey Ferguson. MF is said to have a special pull for consumers. 

The termination of the trademark will not only affect the commercial ambitions of both companies but can also cause concern among the existing Massey Ferguson users in India, which number more than 3 million.