On Monday, the company announced that it will pay $7.6 billion -- $8.6 billion, including net debt -- for Bucyrus
While commodities demand has yet to bounce back in traditional markets, minerals-rich developing nations such as Brazil, China, and India appear to be taking up much of the slack. As a result -- and following staff cuts involving 37,000 full-time and contract employees when many of its markets softened -- Caterpillar was able to double its profit in the third quarter.
The newly announced deal -- which is expected to close in mid-2011 -- follows Bucyrus's $1.3 billion acquisition of Terex's
In announcing the planned purchase, Caterpillar's still-new CEO Doug Oberhelman said: "For several years, mining customers have been asking us to expand our range of products and services to better serve their increasingly complex requirements. This announcement says to those customers, we heard you loud and clear." He also predicted that "this, and other recent acquisitions, will position Caterpillar for industry leadership and will be positive for our stockholders, customers, and employees."
The announcement accompanies other news from the mining industry: Australia's BHP Billiton
Caterpillar's need to gain regulatory approvals, along with that of Bucyrus shareholders, appears less problematic, especially with blessings in hand from both boards. Furthermore, I'm convinced that the proposed deal appears to portend an excellent fit. And with Mr. Oberhelman alluding to Caterpillar potentially earning $10 per share by 2012, it's difficult to see how the company also wouldn't fit nicely into Foolish portfolios.
The Fool has established a bear put spread position on Caterpillar. Try any of our Foolish newsletter services free for 30 days.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't have financial interest in any of the companies named above. The Motley Fool has a disclosure policy.