The agreement to create a major global provider of trucks, hydraulic excavators, drilling and blasting equipment coal mine is a step in Caterpillar acquisitions under its new chief executive, Doug Oberhelman.
The Peoria, Illinois-based company is increasing its exposure to the mineral sector at a time when demand for materials ranging from iron ore to coal has been fueled by rapid economic development in emerging markets like China and India .
"The mining segment for us is a key strategic area," said Mr. Oberhelman, who took over from Jim Owens this year, the television channel CNBC. "The demand for minerals, coal, for a lot of things out of the ground will increase as urbanization occurs."
Bucyrus shareholders will receive $ 92 cash per share, a premium of 32 percent over the closing price action on Friday.
Bucyrus shares rose 29 percent to $ 90 in morning trade on Nasdaq, while Caterpillar was slightly higher at $ 81.61 on the New York Stock Exchange.
Mr. Oberhelman, adding that financing costs are very attractive, Caterpillar said it would issue about $ 2 billion in new shares once the deal closes in mid-2011.
"We are at the early onset of the cycle in our core business and in mining," he said.
The deal is the largest in the history of Caterpillar for 85 years "a very remote possibility," said Jim Dugan, a spokesman for the company. Including $ 1 billion of debt being assumed by Bucyrus Caterpillar, the transaction is valued at $ 8.6 million.
Caterpillar already makes a wide range of mining equipment. Earlier this year, said he hopes to expand the line to meet demand from mining companies, who are struggling to benefit from price recovery of copper and other minerals.
This demand is driven by the accelerated development of infrastructure in the developing world.
"It's a good-sized deal," said Eli Lustgarten, an analyst at Longbow Securities. "It is likely that long term wise. Mining is an important part of long-term future of Caterpillar. It gives them a line much, much broader base of products with a very, very large installed."
Caterpillar shares have increased first-class 42 percent this year, about three times the 14 percent increase in the group of Standard & Poor's, the capital goods industry.
Emerging economies have been increasing investment in energy infrastructure and the construction of others, driving demand for iron ore, copper and coal. An optimistic view of demand and price stability have inspired the miners to expand capacity.
Caterpillar resolve to deepen the market coincides with a healthy recovery in spending by customers, after the economic crisis slowed significantly the budgets of the miners. total capital expenditure of mining companies increased by 50 percent to a record $ 113 million in 2011, up from a record $ 110 million in 2008, according to Bernstein Research.
It is the latest in a series of agreements in recent months for Peoria, Illinois-based Caterpillar by Mr. Oberhelman. Last month bought MWM Holding GmbH, a German manufacturer of gasoline and diesel engines, the British private equity firm 3i Group Plc for $ 810 million in cash. And during the summer I bought EMD, a U.S. manufacturer railway locomotives, for $ 820 million.
The agreement leaves Joy Global Inc. as the last remaining manufacturer based independent mining equipment. Joy shares rose 7 percent to $ 77.33 on Nasdaq. Heavy equipment manufacturers CNH Global, Terex also were higher.
Apart from Joy Global and Bucyrus, Komatsu Ltd. and Hitachi Construction companies also have a strong presence in the market. World No. 2 truck maker AB Volvo also makes trucks and mining.
One of the products Caterpillar is committed to bring to market was one that stopped a few years ago: A massive mining shovel has brought in direct competition with Bucyrus and Joy Global. Caterpillar mining shovel out of business in 2004, citing lower demand and an uncertain outlook for the industry. In its second incarnation, he plans to make mining shovels that are hydraulically operated from 125 to 800 tons.
Caterpillar said its mining business to locate in South Milwaukee, Wisconsin.
Caterpillar is also expanding its capacity mining trucks and hydraulic excavator product line to boost the mining segment, which currently represents about 28 percent of total sales.
JP Morgan Securities LLC acted as exclusive financial advisor in the deal Bucyrus Caterpillar and has provided funds committed to the transaction.
Deutsche Bank Securities Inc. and UBS Investment Bank acted as financial advisor to Bucyrus.
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