Caterpillar Inc.
(
CAT
) is selling the distribution and support unit, formerly operated
by Bucyrus International Inc. in Western Australia, Australian
Capital Territory and New South Wales. The business will be bought
by WesTrac Pty Limited of South Guildford, Western Australia,
for $400 million. The sale of the unit is part of its integration
of Bucyrus. WesTrac is a wholly owned subsidiary of Seven
Group Holdings Limited and is one of the largest Caterpillar
dealers in the world.
The distribution business was included in Caterpillar's purchase
of Bucyrus Inc., a South Milwaukee-based manufacturer of surface
and underground mining equipment, in July 2011. The $8.8 billion
buyout was the biggest deal ever in Caterpillar's history. It
capitalized on the rising demand for coal and minerals triggered by
growth in emerging nations.
The current divestment is expected to close by the end of the
second quarter. In December last year, Caterpillar sold a part of
the Bucyrus distribution business to the Industrial Division of
Sime Darby Berhad for $360 million. Again, in January this year,
Caterpillar sold the distribution and support unit formerly
operated by Bucyrus. in South America, Western Canada and the
United Kingdom, to Finning International Inc. of Vancouver, Canada,
for $465 million.
Caterpillar is also in discussion with WesTrac regarding the
former Bucyrus distribution and support businesses in the WesTrac
dealership territories in North Eastern China. Caterpillar is
systematically divesting the Bucyrus distribution businesses,
preferably to its dealers having mining activities in their
territories. Cat however will operate the Bucyrus distribution
business until the transitions have occurred in a given territory.
The Caterpillar-Bucyrus combined portfolio broadens
Caterpillar's mining equipment product line, resulting in the most
expansive product offering in the mining equipment industry.
Furthermore, Caterpillar can leverage Bucyrus' strong presence in
the emerging markets, its successful aftermarket parts business and
support services for its equipment. The Bucyrus acquisition
positions Caterpillar as the leading global mining original
equipment manufacturer. The combined product portfolio dwarfs
Joy Global Inc.
(
JOY
), the only other manufacturer of surface and underground mining
equipment in the US.
Caterpillar's backlog is at a record level, which holds promise
for the year ahead. We believe Caterpillar's expansion plans of
opening new facilities and furthering existing operations,
particularly in the emerging markets, will boost its long-term
potential. Add to it, the company's top line will continue to grow
on the back of increasing demand for construction and mining
equipment in the long term.
However, recent monthly sales data reflect a slowdown from the
torrid pace of growth witnessed early last year. This may be the
fallout of the European debt crisis, the ensuing uncertainties and
the threat of moderating growth in China. Shares of Caterpillar
presently retain a Zacks #3 Rank (short-term Strong Hold
recommendation).
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of
construction and mining equipment, diesel and natural gas engines,
and industrial gas turbines. The company is one of the few leading
U.S. companies in an industry that competes globally from a
principally domestic manufacturing base. Caterpillar operates two
divisions - M&PS and Financial Products. Caterpillar competes
with the likes of
CNH Global NV
(
CNH
),
Komatsu Ltd.
(
KMTUY
) and
Volvo AB
(
VOLVY
).
CATERPILLAR INC (
CAT
): Free Stock Analysis Report
CNH GLOBAL NV (
CNH
): Free Stock Analysis Report
JOY GLOBAL INC (
JOY
): Free Stock Analysis Report
VOLVO AB ADR B (
VOLVY
): Free Stock Analysis Report
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