In a bid to transform from just engine and generator seller to
become a provider of complete marine propulsion package systems,
) is acquiring Johan Walter Berg AB, a Sweden-based leading
manufacturer of propulsion systems and marine controls for ships.
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The acquisition includes Johan Walter Berg AB flagship brand -
Berg Propulsion. It is one of the world's leading designers and
producers of controllable pitch propellers for the shipping
industry. Berg Propulsion started to build propellers in 1929. It
currently delivers fully customized main propellers, azimuth
thrusters, transverse thrusters and manoeuvre systems, as well as
24-hour service. Its proprietary systems are used in maritime
applications that call for precise maneuvering and positioning.
Currently Berg Propulsion operates from its production facilities
in Sweden and Singapore and has its sales and service offices
located in Shanghai, Guangzhou, Istanbul, Dubai, Singapore,
Bremen, San Sebastian, Rio De Janeiro, Busan, Genoa, Mumbai,
Namibia and the Swedish west coast.
The deal is expected to close in the third quarter of 2013,
subject to final regulatory approvals. On completion, Berg will
be integrated into Caterpillar's Marine and Petroleum Power
Division. Berg's thrusters, propellers and control systems will
be rebranded as Caterpillar.
Caterpillar's Marine and Petroleum Power Division supplies diesel
and natural gas engines for the generation, control and supply of
mechanical and electric power for the marine and petroleum
industries. The division had a good run in the first half of 2012
with an average sales growth of 24% and registering maximum
monthly sales growth of 29% in Jun 2012. The growth however
trailed in the second half, dipping to the single digits. In
2013, sales growth was flat in January and then declined 8% in
February, 1% in March and 6% in April. Lately; the division
witnessed a recovery in May with a 1% growth.
This acquisition will provide the much-needed boost to the
performance of Caterpillar's Marine and Petroleum Power Division
as Berg is one of the most highly regarded brands in the marine
industry. With the acquisition, Caterpillar will now be able to
provide support to marine operators worldwide for a complete,
optimized propulsion package.
Furthermore, Caterpillar will benefit from the recovery in the
U.S. construction sector, expected benefits from the resolution
of its issues related to ERA buy, inventory adjustments nearing
completion and resumption of stock repurchases. However, trimmed
guidance, decline in sales growth, declining backlog and negative
impact of the European debt crisis remain concerns.
Caterpillar currently retains a Zacks Rank #3 (Hold). Other
stocks in the industrial products sector with a favorable Zacks
), with a Zacks Rank #1 (Strong Buy), while
H&E Equipment Services Inc.
Alamo Group, Inc.
) carry a Zacks Rank #2 (Buy).