Bucyrus is based in South Milwaukee, Wis. It makes surface mining equipment used for mining coal, copper, iron ore, oil sands and other minerals.
The deal requires approval by regulators and Bucyrus shareholders.
With a grinding economic recovery ongoing in the West, global companies like Caterpillar Inc. have driven further into China, India and Brazil, where the appetite for raw materials used in construction and mining are strong.
Caterpillar said last month its third-quarter profit doubled, thanks in large part to growth in those markets.
With the Bucyrus deal, Caterpillar seeks to expand its footprint in countries that are “improving infrastructure, rapidly developing urban areas and industrializing their economies,” the company said Monday.
The deal will also significantly expand Caterpillar’s line of mining equipment and double its mining revenue.
Caterpillar and Bucyrus officials said mining companies will also benefit from the deal because they’ll be able to purchase much of their equipment and parts from a single supplier with less hassle and lower costs.
“This fits completely into the strategy of our customers,” Bucyrus CEO Tim Sullivan said.
After years of cutting costs, industry experts had been waiting for a major acquisition like the one Caterpillar announced.
“I think Caterpillar is definitely doubling down, not just on emerging markets, but on commodities in general,” Morningstar analyst Adam Fleck said. “Caterpillar is suggesting that we’re in the very early innings of the commodity price rebound.”
Specifically, Fleck thinks Caterpillar is focusing on coal, of which China is a massive importer.
To land Bucyrus International Inc., based in South Milwaukee, Wis., Caterpillar will pay $92 per share, a 32 percent premium to Bucyrus’ closing price on Friday. The deal, which is valued at $8.6 billion including debt, is expected to close in mid-2011.
Caterpillar plans to base its mining division in South Milwaukee.
Shares of Bucyrus jumped 29 percent to $89.75 in afternoon trading.
Caterpillar made drastic cuts during the recession, vowing then that it would be in a better position when the economy rebounded.
It cut 37,000 full-time, contract and part-time workers, though it’s since hired back about 15,000 people.
The company now appears ready to make good with a market share grab that could put it in a commanding position in places where the economy has rebounded.
Caterpillar is building a large distribution center in Clayton that will employ roughly 600 people. It’s scheduled to open early next year.