Caterpillar spending $7.6 billion on Bucyrus mining equipment


Soon, Bucyrus equipment will carry the signature Caterpillar logo. Image: Flickr / pacomexico / CC-BY

In an effort to expand the company, equipment manufacturer Caterpillar is going to purchase Bucyrus mining equipment. Caterpillar currently manufactures everything from big machines to diesel engines. The purchase of Bucyrus will help Caterpillar expand into the mining equipment industry.

The business of Bucyrus

Far from a household name, Bucyrus is a mining-equipment manufacturer. Based in South Milwaukee, Wis., Bucyrus employs just less than 7,000 people and did about $2.65 billion worth of business in 2009. It manufactures equipment to be used in both surface and underground mining for coal, gold, copper and other high-value minerals around the world. Bucyrus equipment has been used to dig everything, up to and including the Panama Canal.

Caterpillar’s offer for Bucyrus

Bucyrus has been on an expansion kick for the last few years. In 2007 and 2010, Bucyrus made deals with DBT GmbH and Terex Mining. Bucyrus is a publicly owned company, and stockholders will be getting $92 a share from Caterpillar. This is about 30 percent above what Bucyrus stocks were trading for at the time of the purchase. This $7.6 billion dollar deal will be financed with equity, debt and available cash via a corporate-sized payday loan no faxing. Caterpillar is relying on the “cheap financing” from low interest rates available in banks.

What the Bucyrus/Caterpillar deal means

The deal between Bucyrus and Caterpillar is orchestrated in such a way that Caterpillar may be able to take advantage of the growing business of mining and the world’s heavy appetite for metals, rare-earth minerals and mined products. While one-third of the business of Bucyrus is sales of their products, two-thirds includes after-market parts and services. In short, Caterpillar will be expanding into a major growth industry. This will also help vertically integrate Caterpillar — meaning the company will not only provide the trucks and big equipment for mining sites but the equipment that will be pulling minerals out of the ground.

Wall Street Journal