The integration of the two companies will provide mining customers with a “one-stop shop” worldwide, with Cat’s remanufacturing products and services now available for Bucyrus equipment.
Facets of the business – including purchasing and engineering – will benefit from additional scale and cost efficiencies, and utilizing Caterpillar’s engines and components will both enhance the performance of Bucyrus equipment as well as lower the costs of owning and operating the machines, Cat chairman and chief executive Doug Oberhelman said.
Mining customers had been asking the company for many years to expand its product and services range to better serve their needs.
"It is a strong statement about our belief in the bright future of the mining industry,” Oberhelman said.
“Our strategy calls for disciplined investment in attractive industries that value our product and service delivery model. Our performance through the global economic turmoil of 2008-09 allowed us to emerge with a strong balance sheet and the ability to make strategic investments in companies like Bucyrus.”
Under the terms of the deal, Bucyrus shareholders will receive $92 per share, $7.6 billion in aggregate all in cash. The transaction equates to an implied premium of 32% to Bucyrus’ November 12 share price. Caterpillar also agreed to assume $1 billion in Bucyrus debt.
The acquisition, which is expected to close by the middle of next year, has been approved by both companies’ boards of directors.
Caterpillar will use a combination of balance-sheet cash, debt and up to $2 billion in equity to fund the purchase of the original equipment manufacturer.
Bucyrus’ principal legacy products will maintain the Bucyrus name. Caterpillar, meanwhile, will make Bucyrus’ headquarters in South Milwaukee, Wisconsin, the head office of its mining business arm.
“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,” Caterpillar said.
Bucyrus president and CEO Tim Sullivan called the milestone deal “outstanding and financially compelling” for the OEM’s shareholders.
“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,” he said.
“I am confident that we have found an excellent partner in Caterpillar. We are very pleased that Caterpillar has committed to locate its mining business headquarters in Milwaukee and we are confident that the combined global platform will be extremely well positioned to capitalize on the substantial growth opportunities in this market in the years ahead."
The transaction’s close is pending regulatory approvals as well as other closing conditions and approval by Bucyrus stockholders.
Once those conditions have been met, Caterpillar group president Steve Wunning will assume executive office accountability for Bucyrus in addition to his oversight responsibility for Cat’s mining business.
"Even today at minesites around the world, our customers are using Bucyrus shovels to load Caterpillar mining trucks," he 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."
Caterpillar said a significant motivation for the deal, its largest acquisition ever, was the estimated $400 million of annual synergies beginning in 2015 derived from combining the companies’ complementary product offerings and financial strength.
