Caterpillar 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 US$ 8.6 billion (including net debt). The acquisition is based on Caterpillar’s key strategic imperative to expand its leadership in the mining equipment industry, and positions the company to capitalise 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 industrialising their economies.
Under the terms of the transaction, which has been approved by the boards of directors of both companies, Bucyrus shareholders will receive US$ 92/share, US$ 7.6 billion in aggregate consisting of all cash. Caterpillar will fund the acquisition through a combination of cash from the balance sheet, debt and up to US$ 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.
Caterpillar Chairman and CEO Doug Oberhelman said that the announcement is “a strong statement about our belief in the bright future of the mining industry.”
The closing of the transaction is subject to regulatory approvals, customary closing conditions and approval by Bucyrus stockholders. At that time, Caterpillar Group President Steve Wunning will have executive office accountability for Bucyrus, along with his current responsibilities for the company’s mining business.
“Even today at mine sites around the world, our customers are using Bucyrus shovels to load Caterpillar mining trucks,” Wunning said. “This combination, as well as the significant expansion in products and facility capacity already announced, gives us the opportunity to expand the range of surface and underground mining products and solutions offered to customers by Caterpillar and its dealer network.”
A driving motivation for the transaction is Caterpillar’s estimate of more than US$ 400 million in annual synergies beginning in 2015 derived from the combined financial strength and complementary product offerings of the combined mining equipment businesses.
Synergies driven by the acquisition include:
- Market leading sales and support capabilities of Caterpillar dealers and a broad, one-stop shop for global mining customers.
- Caterpillar remanufacturing products and services for Bucyrus equipment.
- Caterpillar engines and components to enhance performance and lower owning and operating costs for Bucyrus equipment.
- Additional scale and cost efficiencies in areas such as purchasing and engineering.
- Deployment of manufacturing best practices through the Caterpillar Production System.
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