NOVEMBER 15, 2010, 1:39 P.M. ET.

Caterpillar to Buy Bucyrus

By JAMES R. HAGERTY

Caterpillar Inc. agreed to buy Bucyrus International Inc., a maker of mining equipment, for $7.6 billion in what amounts to a bet on a continued global boom in coal and other minerals.

Demand from China, India, Brazil and other emerging markets will "push demand" for coal, other minerals and "everything that comes out of the ground," Doug Oberhelman, Caterpillar's chief executive, said Monday during an interview. The planned purchase, subject to regulatory approvals, would make Caterpillar the world's "broadest supplier" of mining equipment, Mr. Oberhelman said.

Steven Russolillo discuss Caterpillar's purchase of a mining equipment maker for $7.6 billion.
.The proposed acquisition would accelerate consolidation among global makers of mining equipment. In February, Bucyrus bought Terex Corp.'s mining-equipment division for $1.3 billion. Other big rivals in the mining-equipment segment include Komatsu Ltd. of Japan and Joy Global Inc. of the U.S.

"Our customers have told us they want fewer suppliers" of mining equipment, Mr. Oberhelman said.

The cash offer from Caterpillar, already the world's largest maker of construction and mining equipment, values Bucyrus at $92 a share, a 32% premium over last week's closing price for Bucyrus on the Nasdaq Stock Market.

Caterpillar Adds German Engine Maker to Power Unit. Access thousands of business sources not available on the free web. Learn More .Caterpillar said it would finance the purchase partly with debt and as much as $2 billion from a sale of new Caterpillar shares.

The planned acquisition is the third by Caterpillar this year. In October, the Peoria, Ill., company said it would buy engine maker MWM Holding GmbH of Germany for about $810 million. In August, Caterpillar completed the purchase of railroad-locomotive manufacturer Electro-Motive Diesel for $820 million.

The purchase of Bucyrus would be the largest deal in Caterpillar's history and the first acquisition by Caterpillar since Mr. Oberhelman took over its leadership in July. The proposed deal is scheduled close in the middle of 2011.

Bucyrus, based in South Milwaukee, Wis., makes equipment used in mining coal, iron ore, copper, oil sands and other minerals. The company, which traces its roots to the 1880s, provided excavators and digging equipment for the construction of the Panama Canal. In the mid-1990s, the company was reorganized in U.S. bankruptcy court after a leveraged buyout left it with more debt than it could handle.

In 2009, Bucyrus reported earnings of $312 million, or $4.12 a share, on sales of $2.65 billion. The company had an order book of $2.53 billion at the end of the third quarter, with bookings recovering over the past year after a slump when the commodity bubble burst in mid-2008. Analysts expect Bucyrus to earn $3.56 a share this year on sales of $3.56 billion.

Bucyrus has manufacturing facilities in South Milwaukee, Houston and Germany.

Mr. Oberhelman said there is virtually no overlap between the types of mining equipment made by Bucyrus and Caterpillar. Many miners use Bucyrus shovels to load Caterpillar-made mining trucks, Caterpillar said.

— Bob Tita contributed to this article.
Write to James R. Hagerty at bob.hagerty@wsj.com

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