New Holland, which is 69 per cent owned by Fiat SpA, slipped 43.75 cents to $17.5625 Friday on the Big Board on fears that the acquisition would hurt earnings. Fiat will hold a 71 per cent controlling interest in the new company. The deal is likely to face antitrust scrutiny from European and US regulators, who may force the combined company to shed some assets, analysts said.

New Holland plans to fund the acquisition by issuing debt and equity.

Even so, the deal creates a formidable competitor to Deere, which has been the world's largest maker of farm-equipment by a wide margin. A combined Case and New Holland would have estimated 1999 sales of $ 10.8 billion, compared with Deere's $ 13.8 billion, according to Tobias Levkovich, an analyst at Salomon Smith Barney. Its farm-equipment sales could reach $6.6 billion, close to Deere's $ 7.2 billion.

In research notes, Levkovich said estimated sales for construction equipment for the combined company could reach about $ 4.1 billion, surpassing AB Volvo of Sweden but trailing Japan's Komatsu Ltd.'s $ 5 billion and the US industry giant Caterpillar Inc's $ 12 billion-plus net sales of construction equipment.

"In our view, Agco Corp. may have to find a partner in this sector, but could also be viewed as a takeover candidate, while Deere clearly has a more potent competitor in both the agricultural and construction-equipment markets," Levkovich said. Agco, Duluth, Ga, is a global maker of farm equipment.

Even though New Holland is run from a management office in England, registered in the Netherlands and majority owned by Italy's Fiat, its roots are in the US New Holland Machine Co was founded in Pennsylvania in 1895, and, now, through a series of mergers, includes the former tractor operations of Ford Motor Co. and Fiat.

Case, founded in 1842 as the J ICase Co. by Jerome Increase Case, was the first builder of a steam engine for agricultural use. Its parent company was acquired by Tenneco Inc. in 1967, which took Case public in 1994. By 1996, Tenneco divested itself of all interest in the company, which makes farm and construction equipment such as loader/backhoes, farm tractors and self-propelled combines.

Levkovich, citing the potentially significant cost savings, hailed the proposed merger as "win-win." Both companies have strong financial subsidiaries that lend money to farmers and construction companies seeking to buy equipment. But Case's financial arm has branched out in recent years, offering loans to buyers of equipment made by manufacturers other than Case. The business has helped insulate Case, particularly amid recent slumps in the equipment market.