Caterpillar Inc., which makes earthmoving machinery and supplies agricultural equipment, announced an agreement to acquire rival Bucyrus International Inc. for a total of $7.6 billion, or $92 per share, in cash.
The deal valued at about $8.6 billion, including net debt, boosts Caterpillar's presence in the mining equipment industry and positions the company to capitalize on the robust long-term outlook for commodities driven by the trend of rapid growth in emerging markets.
The purchase price represents a 32 percent premium to South Milwaukee, Wisconsin-based Bucyrus' closing share price of $69.62 on Friday. In pre-market trading on Monday, the stock is up nearly 30 percent to $90.
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 Caterpillar and its dealer network, said Caterpillar Group President Steve Wunning.
Caterpillar estimates over $400 million in annual synergies starting in 2015 from the combined financial strength and complementary product offerings of the combined mining equipment businesses.
Caterpillar 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.
J.P. Morgan Securities LLC advised Caterpillar on the transaction, while Deutsche Bank Securities and UBS Investment Bank served as financial advisors for Bucyrus.
On July 23, 2004, Bucyrus became a publicly traded company with an IPO price of $18.00 per share. Bucyrus, which has been publicly held several times throughout the course of its history, has nearly 10,000 employees worldwide, according to its Web site.
Shares of Caterpillar, which ended Friday's regular trading session at $81.04, are down 1.5 percent at $79.83 in Monday's pre-market trade.