Caterpillar Inc.
(
CAT
) is selling the distribution and support business formerly
operated by Bucyrus International in Peru to Ferreyros S.A.A. for
$75 million.
Ferreyros, the largest distributor of capital goods and
associated services in Peru, has been a Caterpillar dealer since
1942. It operates in more than 60 locations across the country
through a network of branches and offices and constant on-site
support.
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.
Last week, Caterpillar announced the sale of the distribution
and support unit, formerly operated by Bucyrus International Inc.
in Western Australia, Australian Capital Territory and New South
Wales to WesTrac Pty Limited of South Guildford, Western Australia,
for $400 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. In last December,
Caterpillar sold a part of the Bucyrus distribution business to the
Industrial Division of Sime Darby Berhad for $360 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. Caterpillar, however, will operate the Bucyrus
distribution business until the transitions have occurred in any
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, we have recently downgraded our recommendation
on Caterpillar from Outperform to Neutral due to the recent
loss of momentum in sales growth, margin headwinds, negative impact
of the European debt crisis and a slowing Chinese economy. The
quantitative Zacks #1 Rank (short-term Strong Buy rating) for the
company indicates upward pressure on the shares over the near
term.
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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