Contractors World

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Contractors World 2010 Volume 1 Issue 10
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Industry News & Comment

Big, bigger, biggest . . .

Caterpillar acquires Bucyrus to increase domination of construction and mining sectors

Caterpillar is attacking the markets very aggressively at this time, using its capital strength to acquire companies to further increase its dominance on the construction, quarrying and mining sectors.

Caterpillar acquires Bucyrus to increase domination of construction and mining sectorsCaterpillar Inc. and Bucyrus International, Inc. have announced that they have entered into an agreement under which Caterpillar will acquire Bucyrus International in a transaction valued at approximately $8.6 billion (including net debt).
This acquisition significantly increases Caterpillar's domination as a supplier to the building, construction, demolition, quarrying and mining sectors. Historically, always a supplier to the mining industry, the range of products that Bucyrus brings to Caterpillar extends the groups ability to supply a vast range of high-production surface and underground mining.

Questions to be answered are product rationalisation as Bucyrus recently acquired Terex mining division with its mining excavators and dump trucks. Caterpillar has also announced its own range of mining excavators. Which range will be given priority has yet to be announced.

At the first opportunity, Contractors World will try to determine what rationalisation is involved and, of course, this extends to dealer networks and product supports services.

The announcement went on to say that the acquisition is based on Caterpillar’s key strategic imperative to expand its leadership in the mining equipment industry, and positions Caterpillar to capitalize on the robust long-term outlook for commodities driven by the trend of rapid growth in emerging markets which are improving infrastructure, rapidly developing urban areas and industrializing their economies.

Under the terms of the transaction, which has been approved by the boards of directors of both companies, Bucyrus shareholders will receive $92 per share, $7.6 billion in aggregate consisting of all cash.

Bucyrus  205 ton payload  MT3700AC haul truck at the New Gold Mesquite Mine in South California, USA     The transaction represents an implied premium of 32 percent to Bucyrus' share price as of November 12, 2010. Caterpillar will fund the acquisition through a combination of cash from the balance sheet, debt and up to $2 billion in equity.

The transaction is expected to close in mid-2011. Caterpillar intends to locate its mining business headquarters in South Milwaukee, Wisconsin, where Bucyrus headquarters is currently located, and maintain the Bucyrus brand for the principal Bucyrus legacy products.

Bucyrus 205 ton payload MT3700AC haul truck at the New Gold Mesquite Mine in South California, USA

“For several years, mining customers have been asking us to expand our range of products and services to better serve their increasingly complex requirements,” said Caterpillar Chairman and CEO Doug Oberhelman. “This announcement says to those customers, we heard you loud and clear. It is a strong statement about our belief in the bright future of the mining industry. Our strategy calls for disciplined investment in attractive industries that value our product and service delivery model," Oberhelman said.

"Our performance through the global economic turmoil of 2008-2009 allowed us to emerge with a strong balance sheet and the ability to make strategic investments in companies like Bucyrus. This, and other recent acquisitions, will position Caterpillar for industry leadership and will be positive for our stockholders, customers and employees.”

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