“We see a steady, stable growth in coal over the next 25 years,” Bucyrus chief Tim Sullivan said, adding that the transaction would provide an opportunity to expand into other markets, particularly in China.
Wisconsin-based Bucyrus highlighted DBT’s stronghold in the country – countering its footprint, which is admittedly smaller – as a great opportunity moving forward, particularly in the underground and thin seam sector.
One area where the footprints will now more closely match, the company said, is in terms of cost basis between DBT and rival OEM Joy Mining. Manufacturing operations – since both companies at least partially manufacture in Europe – will likely now be more in line with each other.
DBT parent company RAG Coal International released a statement Monday outlining the structure of the sale, and said the move is a strategic one for both sides.
“With the new shareholder, Bucyrus, DBT is gaining a long-term growth perspective,” RAG president Dr Jürgen Stadelhofer said.
“By holding the Bucyrus stake and the two-step transaction model, we are documenting our long-term interest in the development of the new group. I am convinced that this will have a positive outcome for both customers and employees.”
The transaction of the deal, worth $US731 million, should be complete during the late first quarter or early second quarter of next year. At that time, Sullivan said the company will provide a guidance outlook for the remainder of 2007.
With a combined business representing 60% underground and 40% surface, the new workforce will exceed 6000 individuals, according to Bucyrus. There will also be 40 sales and service offices worldwide when the deal is sealed.
Sullivan also noted that OE versus rebuild equipment is another area where the two companies will benefit from the other’s experience.
DBT currently maintains approximately 70% in the OE side of the business.
“We think we can bring a lot to the table,” Sullivan said, because of the company’s ability to effectively pursue the “spare parts business”
Executives also responded to questions about slowing of the industry, which has been noted in eastern Appalachia especially. Sullivan said the company feels it is a short-term situation: “The coal slowdown is temporary. China shows no signs of slowing down.”
Sullivan assessed Bucyrus’ position in the coal industry, saying it was in the “first, second, third inning of the coal game” and that the company was expecting “a good, long run” with its newly acquired partner.
“We are extremely excited about the combination with DBT and we believe that this is an unique opportunity to jointly build a stronger company for our customers, employees and shareholders. Both companies share a similar culture and history with a focus on technology, delivering high quality products, valued employee relationships and proving first-class service to our customers,” he said.