Caterpillar Deal: Everything You Wanted to Know about Bucyrus

Caterpillar announced this morning a deal to buy Bucyrus International Inc., a mining-equipment company, for $7.6 billion in cash as Caterpillar looks expand its mining foothold and take advantage of growing worldwide demand for commodities.
Caterpillar said the deal is the biggest acquisition in the company’s history. Bucyrus shareholders are slated to receive $92 a share, a 32% premium to the company’s stock price on Friday. Shares opened roughly 30% higher this morning, and share prices of other mining and equipment companies, including Joy Global, Terex and Manitowoc, also opened higher. Caterpillar is taking advantage of low interest rates and cheap financing; the company plans to fund the deal with cash on hand, debt and up to $2 billion in equity.


While Caterpillar is a household name, Deal Journal readers will be forgiven for not knowing the ins-and-outs of Bucyrus’s business. Here is a dossier on the company:
Main businesses: Makes equipment used in surface mining and underground mining in the hunt for coal, copper, oil sands, iron ore, gold and other minerals.
HQ: South Milwaukee, Wis.

Company history: Bucyrus’s predecessor company started in 1880 producing excavator machines. The company’s name is taken from Bucyrus, Ohio, where the predecessor company was founded.) The company’s machines were used in digging of the Panama Canal, according to the Bucyrus corporate timeline.
Largest markets: Australia, Canada, China, India, South Africa, South America, the U.S. and Germany
For those obsessed with big machines: Some of Bucyrus’s fun machines include electric mining shovels, hydraulic excavators, rotary blasthole drills, automated plow systems and draglines (big buckets used to dredge up and haul away rock and soil trapped above the coal). For you backyard miners, you can buy a Bucyrus dragline for $65 million to $200 million a pop.
Big customers: BHP Billiton, the Anglo-Australian mining giant that just dropped a $39 billion acquisition offer for Potash Corp. of Saskatchewan, accounted for about 14% of Bucyrus’s 2009 sales.
Financials:
2009 sales: $2.65 billion (Caterpillar had $32.4 billion in sales for 2009)
2009 net income: $312.7 million (Caterpillar: $895 million)
Sales of after-market parts and services account for nearly two-thirds of the company’s total sales
Employees: 6,900 people as of Dec. 31, about 4,000 outside of the U.S.
(Caterpillar had 93,813 employees at the same period)
Track record of acquisitions: In 2007, Bucyrus expanded into underground mining with a deal for DBT GmbH. Earlier this year, Bucyrus bought the mining equipment business of Terex Mining for $1 billion in cash and 5.8 million shares of stock. The rationale of the deal was to expand Bucyrus’s line of heavy equipment into big machines such as hydraulic excavators and drills. Bucyrus needed additional loans to fund the deal. Apparently in mining, it’s go big or go home. Bucyrus went somewhat big, and then decided it wasn’t big enough.