Cat expands its Chinese footprint

EQUIPMENT manufacturing giant Caterpillar has completed its acquisition of Chinese manufacturer ERA Mining Machinery in a deal worth up to $US733.8 million.
Cat expands its Chinese footprint Cat expands its Chinese footprint Cat expands its Chinese footprint Cat expands its Chinese footprint Cat expands its Chinese footprint

Image courtesy of Caterpillar.

Justin Niessner

The offer made last November was cleared by China’s Ministry of Commerce in April and would include ERA’s wholly owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing, commonly known as Siwei.

“Siwei is an outstanding company with excellent people and great products in an industry that will continue to grow as the world population increases and mass urbanization drives a greater need for commodities,” Caterpillar resource industries group president Steve Wunning said.

“This is a strategic decision by Caterpillar to enhance and broaden our offerings for customers in China and in the long run will provide Siwei a strong platform for growth beyond China.

“I am proud to say that Caterpillar has a strong commitment to technical innovation and safety and we plan to utilize our customer-focused experience through Siwei to help our mining customers become more efficient and safer within the mines.”

According to the deal, Caterpillar received 98% of ERA’s common stock and 98% of all outstanding options to purchase ERA stock.

The company said it intended to acquire the remaining shares of ERA common stock in the third quarter of 2012.

The final purchase price is estimated to be between $652.7 million and $733.8 million, depending on the performance of ERA shares.

Through Siwei, ERA manufactures and sells underground equipment in mainland China.

Siwei has a 600,000sq.m manufacturing base at Zhengzhou in the Henan province, where it manufactures and sells roof support equipment.

Its employees will be retained by Cat.

“We intend to maintain the fundamental aspects of Siwei that have made the company so successful and continue with the rapid growth that Siwei has delivered,” Wunning said.

“We are going to build on Siwei's reputation, great products and customer relationships, grow and expand its roof support business in China and longer term will leverage Caterpillar's broad global reach to help bring Siwei's products and expertise to mining customers worldwide.”

Caterpillar described the acquisition as a strategic imperative in expanding its role in the Chinese coal mining equipment industry.

China produces almost half of the world’s coal and is forecast to grow over the next several years.

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