Caterpillar plans to buyout Bucyrus International, a manufacturer of surface mining equipment, for USD 7.6 billion. The buyout will help Caterpillar expand in countries where the demand for raw materials used in construction and mining are strong. It will also extend the company’s line of mining equipment and significantly increase their mining revenue. Mining companies will benefit from the buyout as they’ll be able to purchase both equipment and parts from one supplier, lowering costs. Caterpillar will pay USD 92 a share at a 32% premium. The deal is valued at USD 8.6 billion including debt with completion scheduled for mid 2011. Caterpillar will invest USD 700 million to expand production on their mining trucks as there is little overlap between the products Caterpillar and Bucyrus offer. This deal will add USD 400 million a year to the company’s operating profit from 2015.
