Bucyrus Buyout: Flurry of Sector Interest (BUCY, CAT, JOYG, TEX, MTW)

The day has come for Bucyrus International Inc. (NASDAQ: BUCY).  Caterpillar Inc. (NYSE: CAT) has announced that it will expand its mining equipment operations and product offerings with the acquisition of Bucyrus.  The deal is valued at $8.6 billion after the inclusion of debt.  Bucyrus shareholders will receive $92.00 per share, which is about $7.6 billion in aggregate consisting of all cash in a deal representing a 32% premium to Friday’s close.

Caterpillar will fund the acquisition through a combination of cash from the balance sheet, debt and up to $2 billion in equity.  Caterpillar has noted that its mining customers have been asking it to expand the range of products and services to better serve their increasingly complex requirements.

Bucyrus is soaring by almost 30% at $90.35 in active trading.  What is interesting is that investors are treating this potentially as the first of several consolidation prospects in the mining equipment sector.  If you look at the Bucyrus competitors and others in the mining equipment space, the moves speak for themselves:

Joy Global, Inc. (NASDAQ: JOYG) is indicated up over 7% at $77.88; the 52-week range is (was) $42.45 to $76.72.

Terex Corp. (NYSE: TEX) is up over 8% at $26.40; its 52-week range is $16.79 to $28.71.

Manitowoc Co. Inc. (NYSE: MTW) is up over 4% at $11.67; its 52-week range is $8.48 to $16.43.

Bucyrus designs and makes equipment for mining of coal, copper, oil sands, iron ore, and other minerals in mining centers worldwide. The deal is apparently the largest of Caterpillar’s of the sort, although this is an easy integration for the company as Caterpillar had a market cap in excess of $48 billion.  Caterpillar shares are down 1.9% at $79.47 versus a 52-week range of $50.50 to $83.84.

JON C. OGG