In its largest deal ever, Caterpillar Inc., the world's largest construction and mining equipment maker, announced on Monday that it will acquire surface mining equipment maker, Bucyrus International Inc. for $7.6 billion (US) in cash.
The result will be a global supplier of trucks, hydraulic shovels, blasting drills and coal-mining equipment.
Caterpillar already makes a wide range of mining equipment. The acquisition is aimed at expanding its line of mining equipment in order to meet the increasing demand in the developing world. This demand is driven by rapid infrastructure development in emerging markets like China and India.
The transaction is worth $8.6 billion when including $1-billion of Bucyrus debt being assumed by Caterpillar.
The purchase price works out to $92 per share, a 32 percent premium to Bucyrus' closing price on Friday.
J.P. Morgan served as financial adviser for Caterpillar while Deutsche Bank and UBS Investment Bank served as financial advisers for Bucyrus for the deal. This is the latest in a series of acquisitions made by Caterpillar Inc. in recent months. Caterpillar Inc. has also acquired MWM Holding, a German maker of gas and diesel engines ($810 million cash), and EMD, a U.S. maker of train locomotives ($820 million cash) over the last few months.
The deal is awaiting approval from regulators and shareholders and is expected to close in mid-2011. Caterpillar announced that it would issue about $2 billion in new shares once the deal closed.
Caterpillar Inc. expects to save about $400 million a year starting in 2015 from the acquisition. Meanwhile, Bucyrus’ shares rose 29 per cent in morning trade on the Nasdaq, after the announcement.