MPR News Chief Meteorologist Paul Huttner signs off

MPR News helps you turn down the noise and build shared understanding. Turn up your support for this public resource and keep trusted journalism accessible to all. 

Turn Up Your Support

By Samantha Bomkamp, AP Business Writer
      

NEW YORK (AP) - Caterpillar, the world's largest construction
and mining equipment maker, moved aggressively to capitalize on
demand in emerging markets Monday with a $7.6 billion buyout of
Bucyrus International, a mining equipment manufacturer based in South Milwaukee, Wis.


      As growth remains slow in developed nations like the U.S.,
global companies like Caterpillar Inc. have driven further into
China, India and Brazil, where the appetite for raw materials used
in construction and mining are strong.


      Caterpillar said last month its third-quarter profit doubled,
thanks in large part to growth in those markets.


      The acquisition, and what Caterpillar called a robust outlook
for commodities, is being driven by those places that are rapidly
"improving infrastructure, rapidly developing urban areas and
industrializing their economies." 


That includes coal for
electricity for steel; copper and iron ore for pipes and other
construction projects.


      To land Bucyrus International Inc.,  Caterpillar will pay $92 per share, a 32 percent premium to
Bucyrus' closing price on Friday. The deal, which is valued at $8.6
billion including debt, is expected to close in mid-2011.


      Shares of Bucyrus jumped 30 percent in midday trading to $90.26.


      Caterpillar made drastic cuts during the recession, vowing then
that it would be in a better position when the economy rebounded.
It cut 19,000 full-time and 18,000 contract and part time workers.


      The company now appears ready to make good, making a strong bid
to grab market share anywhere that demand is strong.


      "Our performance through the global economic turmoil of
2008-2009 allowed us to emerge with a strong balance sheet and the
ability to make strategic investments in companies like Bucyrus,"
said Caterpillar Chairman and CEO Doug Oberhelman.
      

The Peoria, Ill. company said last month it expects the global
economy to grow by about 3.5 percent next year, on par with
economists' forecasts. But the company predicts developing regions
will grow at about double that rate. 


And even in the emerging
economies where growth is slower, Caterpillar said the replacement
of worn out machinery will drive sales even before those economies
markedly improve.


      The deal, which got the go-ahead from both company
boards, still requires approval by regulators and Bucyrus
shareholders. The company expects to save about $400 million a year
starting in 2015 from the acquisition.

Gallery

Business and Economic News

Caterpillar, the world's largest construction
and mining equipment maker, moved aggressively to capitalize on
demand in emerging markets Monday with a $7.6 billion buyout of
Bucyrus International, which is based in South Milwaukee.

Caterpillar to buy Bucyrus for $7.6 billion

Go Deeper.

Like this?

News you can use in your inbox