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Caterpillar’s Acquisition of Bucyrus, Part 1

According to The Wall Street Journal, Caterpillar Inc. has announced it will buy Bucyrus International Inc. for $7.6 billion. Caterpillar is the world’s largest maker of construction and mining equipment. This deal will also make them the world’s broadest supplier of mining equipment because the two companies have almost no overlap between the types of equipment they make.

Caterpillar has said that the acquisition of Bucyrus will raise their cash flow and yearly operating profits by $400 million by 2015. The deal will create synergies because Bucyrus both uses Caterpillar components in its equipment and sells through their dealer network. Bucyrus and Caterpillar say that the deal is what their customers want. They say that their customers want less suppliers of mining equipment. The companies will also be able to sell equipment at lower costs through the deal.

According to the WSJ, Bucyrus has been around as a company since the 1880s and provided equipment for digging the Panama Canal. The purchase of the company shows that Caterpillar believes that markets for the mining of coal and other minerals will continue to expand. The demand is particularly high in emerging markets, such as India, China and Brazil.

The deal is subject to regulatory approvals.

Source:

Caterpillar to Buy Bucyrus (The Wall Street Journal)

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