Caterpillar: A $7.6 billion commodities bet
Caterpillar, the world’s largest maker of construction equipment, is betting big that the worldwide commodities boom will last, said Hal Weitzman in the Financial Times. The company agreed this week to pay $7.6 billion to acquire mining equipment maker Bucyrus International, and Caterpillar will even move its mining equipment division to South Milwaukee, Wis., Bucyrus’ headquarters. Caterpillar plans to capitalize on strong demand for commodities—including coal, iron ore, and bauxite—driven by rapid industrialization in China, India, and other developing countries. The deal “will accelerate the pace of Caterpillar’s expansion into the mining sector,” which began last summer when the company announced plans to make “a full range of mining shovels for the first time.”
Caterpillar clearly believes the next century belongs to the developing world, said Shruti Date Singh in Bloomberg.com. The company recently announced plans to build factories in Brazil and China. Banking on tens of billions of future earnings in such markets, Cat was willing to pay Bucyrus shareholders $92 a share for control, a handsome 32 percent premium over Bucyrus shares’ market price just before the deal was announced.
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