Caterpillar Gets Bigger, Acquires Bucyrus International Inc.

One of the largest construction equipment manufacturing companies just got bigger. Caterpillar Inc. has acquired Bucyrus International Inc. in a transaction valued at approximately $8.6 billion (including net debt). So what does Cat get out of the deal? According to the manufacturing giant, 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 that are improving infrastructure, rapidly developing urban areas and industrializing their economies.

“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.

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. The transaction represents an implied premium of 32 percent to Bucyrus’ share price as of Nov. 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, Wisc., where Bucyrus headquarters is currently located, and maintain the Bucyrus brand for the principal Bucyrus legacy products.

“This is an outstanding and financially compelling transaction for our shareholders,” said Tim Sullivan, Bucyrus President and CEO. “More fundamentally, it is a testament to the tremendous value our talented team of employees has created over the past several years and to the strength of our brand in the global mining machinery marketplace. I am confident that we have found an excellent partner in Caterpillar.”

For more details, check out the Bloomberg report.