Under the terms of the transaction, which has been approved by the boards of directors of both companies, Bucyrus shareholders will receive $92 per share, $7.6 billion in aggregate consisting of all cash. The transaction represents an implied premium of 32% to Bucyrus’ share price as of November 12, 2010. Cat will fund the acquisition through a combination of cash from the balance sheet, debt and up to $2 billion in equity. The transaction is expected to close in mid-2011. Caterpillar intends to locate its mining business headquarters in South Milwaukee, Wis., where Bucyrus headquarters is currently located, and maintain the Bucyrus brand for the principal Bucyrus legacy products.

“For several years, mining customers have been asking us to expand our range of products and services to better serve their increasingly complex requirements,” Doug Oberhelman, chairman and CEO, Cat. “This announcement says to those customers, we heard you loud and clear. It is a strong statement about our belief in the bright future of the mining industry. 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. This, and other recent acquisitions, will position Caterpillar for industry leadership and will be positive for our stockholders, customers and employees.”

“This is an outstanding and financially compelling transaction for our shareholders,” said Tim Sullivan, president and CEO, Bucyrus. “More fundamentally, it is a testament to the tremendous value our talented team of employees has created over the past several years and to the strength of our brand in the global mining machinery marketplace. Caterpillar is a first-rate global company and it shares our commitment to providing innovative products and exceptional service to customers, creating a collaborative and safe work environment for employees and minimizing the impact on the environment.”

The closing of the transaction is subject to regulatory approvals, customary closing conditions and approval by Bucyrus stockholders. At that time, Cat Group President Steve Wunning will have executive office accountability for Bucyrus, along with his current responsibilities for the company’s mining business. “This combination, as well as the significant expansion in products and facility capacity already announced, gives us the opportunity to expand the range of surface and underground mining products and solutions offered to customers by Cat and its dealer network,” Wunning said.

A driving motivation for the transaction is Cat’s estimate of more than $400 million in annual synergies beginning in 2015 derived from the combined financial strength and complementary product offerings of the combined mining equipment businesses. Synergies driven by the acquisition include:
• Market leading sales and support capabilities of Caterpillar dealers and a broad, one-stop shop for global mining customers;
• Caterpillar Remanufacturing products and services for Bucyrus equipment;
• Caterpillar engines and components to enhance performance and lower owning and operating costs for Bucyrus equipment;
• Additional scale and cost efficiencies in areas such as purchasing and engineering; and
• Deployment of manufacturing best practices through the Cat Production System

In related news, during October Cat announced a five-year agreement with Rio Tinto, one of the largest mining companies, to support and supply a broad range of Cat equipment to Rio Tinto mines worldwide. It is the second consecutive five-year agreement between the two companies, but expands to include the full range of Cat equipment. As part of this agreement Rio Tinto mine site personnel, Cat dealers and Cat employees will work collaboratively to improve machine and mine site performance.