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Caterpillar Completes Acquisition of Bucyrus

Wed July 20, 2011 - National Edition
CEG



Driven by a key strategic imperative to expand its leadership and support for customers in the mining industry, Caterpillar Inc. has completed its acquisition of Bucyrus International Inc. Caterpillar funded the acquisition, valued at approximately $8.8 billion (including net debt), using cash from its balance sheet and debt. The company did not issue equity to help fund the transaction.

Caterpillar Group President Steve Wunning will have executive office accountability for Caterpillar’s Global Mining business, including Bucyrus.

“We are pleased to complete this acquisition and are proud to welcome Bucyrus employees to Caterpillar,” Wunning said. “We are bringing together the best people, the best products and the best facilities from both companies. This acquisition is all about growth and unprecedented opportunities. Combined with our aggressive product development and capacity expansion plans, it will position Caterpillar to offer a broad range of surface and underground mining products and solutions to our customers,” Wunning added.

“The rapid development of the world’s emerging markets is expected to continue to drive an increasing need for commodities as billions of people around the world seek to improve their standard of living. Wherever there is mining, Caterpillar and our dealers will be there to serve our mining customers.”

Organization Structure

As previously announced, the Caterpillar Global Mining headquarters will be in Oak Creek, Wis., and will include three mining divisions reporting to Steve Wunning.

• Caterpillar Vice President Dave Bozeman will lead the Integrated Manufacturing

Operations Division, which will include the global manufacturing operations of Caterpillar mining products. The division has manufacturing operations in Asia, Australia, Europe and North America.

• Caterpillar Vice President Chris Curfman will lead the Mining Sales and Marketing Division, with global responsibility for maintaining and enhancing customer relationships, developing the global marketing strategy and ensuring future growth opportunities.

• Luis de Leon, previously chief operating officer of Bucyrus, has been elected by the Caterpillar board of directors as a corporate vice president, and will lead the new Mining Products Division. The division will be responsible for overall mining product strategy development, product design and product sourcing.

In addition, several other Caterpillar divisions will provide critical support to the mining business. These divisions include the Large Power Systems Division, Advanced Components & Systems Division, Remanufacturing & Components Division, Parts Distribution & Logistics Division and Global Purchasing Division.

Branding

For the past several months, Caterpillar has evaluated the best approach for branding legacy Bucyrus products, seeking input from dealers, customers, the leadership of Bucyrus and outside industry and branding experts. The conclusion was a single brand — Caterpillar — for its mining products.

“As we examined this issue, it became clear it would be in the best long-term interests of our business to have a single brand for our mining customers, and that brand will be Caterpillar,” Wunning said. “This decision is important to quickly bring together one team with a single face to our customers. The decision was endorsed by the Bucyrus board of directors, and we will begin to transition Bucyrus products to the Caterpillar brand in a quick and orderly fashion.”

Distribution

In addition, it became clear that the capabilities of the Cat dealer network with mining customers meant that all products should be sold and serviced by Cat dealers. This is consistent with Cat’s long-held distribution strategy of strong, entrepreneurial, independent dealers. Since Bucyrus predominantly employed a direct model to sell and support products, Cat is beginning the process to transition distribution and support to Cat dealers. It plans to sell the Bucyrus distribution business to Caterpillar dealers that support mining customers around the world.

“Our dealers are very excited about the Bucyrus acquisition and are ready to move forward with the distribution business. Cat dealers have a proven track record in helping customers realize the highest productivity and lowest owning and operating costs, and many mining customers have told us how important the dealers are to their success,” Wunning added.

Funding

At the time it announced the acquisition, Cat expected to fund it through a combination of debt, up to $2 billion of new equity, and cash. As a result of cash flow and an increasingly strong balance sheet, it completed the acquisition without the need to issue equity. Cat issued $4.5 billion of new debt on May 24, 2011, according to the company.

Synergy Benefits

The purchase of Bucyrus is a great strategic acquisition for Caterpillar. The combination of the speed and responsiveness of Bucyrus, along with the process discipline and execution of Caterpillar, will result in a business that will deliver more benefits and value than could be accomplished by either company alone, according to the company.

The benefits include higher sales of new equipment and aftermarket parts and support, lower product cost and greater reliability driven by the use of Caterpillar engines and components in Bucyrus products and improved service and lower owning and operating costs driven by Caterpillar’s global manufacturing, supply chain and purchasing capabilities.

“Today’s announcement marks the beginning of a new era in Caterpillar’s mining business,” said Wunning. “The joining of these two iconic companies is an incredible combination. It positions us for long-term success in an industry with significant growth potential, and we intend to fully leverage our unique strengths to help the mining customer make money. In turn, that will benefit our employees, our stockholders, and the communities in which we live and work. We’re ready to get started.”