Peoria, Ill.-based Caterpillar Inc. announced this morning that it will acquire South Milwaukee-based Bucyrus International Inc. for about $8.6 billion. The transaction is expected to close in mid-2011.
According to a news release, Caterpillar intends to locate its mining business headquarters in South Milwaukee, where Bucyrus headquarters is currently located, and maintain the Bucyrus brand for the principal Bucyrus legacy products.
Earlier this year Bucyrus purchased the former Midwest Airlines corporate headquarters in Oak Creek and is in the process of relocating its headquarters there. A company spokeswoman said this morning that Caterpillar will continue to use the Oak Creek facility.
“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,” said Tim Sullivan, Bucyrus president and CEO.
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. Caterpillar will fund the acquisition through a combination of cash from the balance sheet, debt and up to $2 billion in equity.
"This is an outstanding and financially compelling transaction for our shareholders,” Sullivan said. “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. Caterpillar is a first-rate global company and it shares our commitment to providing innovative products and exceptional service to customers, creating a collaborative and safe work environment for employees and minimizing the impact on the environment.”
Caterpillar said the acquisition of Bucyrus is based on its “key strategic imperative to expand its leadership in the mining equipment industry.”
"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.”
Caterpillar estimates there will be more than $400 million in annual synergies beginning in 2015 derived from the Bucyrus acquisition. A Bucyrus spokeswoman said she was not able to discuss potential job cuts at Bucyrus due to the acquisition.
"They (Caterpillar) will be taking a close look at our business," she said. "Right now we can’t say anything about that."
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.
