Bucyrus buys Terex

BUCYRUS International has bought Terex for $US1.3 billion, creating a mining equipment goliath.

Angie Tomlinson

Terex products covered by the deal include hydraulic mining excavators, electric drive mining trucks, track and rotary blasthole drills, and the highwall miner, as well as the related parts and aftermarket service businesses O&K, Unit Rig, Reedrill, Superior Highwall, Halco and Hypac.

The assets will be added to Bucyrus’s offerings to enable it to market walking draglines, electric rope shovels, hydraulic excavators, off-highway haul trucks, highwall miners, underground longwall, room and pillar and transport machinery, and drills and belt systems.

Bucyrus will pay cash for the company, but Terex has the option to take $300 million in Bucyrus shares.

Bucyrus said the purchase would enable it to offer a broad, complementary product line, expand its geographic footprint and diversify its portfolio of products into more commodities.

As a result of the transaction, Bucyrus will double its addressable market from $15 billion to more than $30 billion and create a team of 10,000 people in nearly 100 locations around the world.

Terex has 38 facilities and 2150 employees.

Bucyrus has already identified more than $100 million in annual run-rate operating synergies, which it says are achievable by 2012.

Synergies will be achieved by integrating the companies’ global manufacturing facilities and leveraging manufacturing centres, as well as engineering and product development resources.

Additional cost savings are expected to come by combining management functions and reducing purchasing expenses, similar to Bucyrus's integration of DBT after acquiring it in May 2007.

For Terex, the sale accelerates its move from a construction and mining equipment company to a machinery and industrial products business.

“For Terex, the attractive cash offer provides us excellent financial flexibility, as our cash balance will substantially equal our outstanding indebtedness," Terex chief executive Ronald DeFeo said.

“The approximately $1 billion of after-tax proceeds will allow Terex to invest in its current, high return-on-capital businesses, or to look to add new, well-positioned niche manufacturers with strong market presence to the company's portfolio.”

The deal has the approval of both boards and does not require shareholder go-ahead. It is subject to regulatory approvals and is expected to close in the first quarter of 2010.

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