Branding

For the past several months, Caterpillar has evaluated the best approach for branding legacy Bucyrus products. We sought input from dealers, customers, the leadership of Bucyrus and outside industry and branding experts. The conclusion was a single brand — Caterpillar— for our mining products.

“As we examined this issue, it became clear it would be in the best long-term interests of our business to have a single brand for our mining customers, and that brand will be Caterpillar,” Wunning said.  “This decision is important to quickly bring together one team with a single face to our customers. The decision was endorsed by the Bucyrus Board of Directors, and we will begin to transition Bucyrus products to the Caterpillar brand in a quick and orderly fashion.”

Distribution

In addition, it became clear that the capabilities of the Cat dealer network with mining customers meant that all products should be sold and serviced by Cat dealers. This is consistent with our long-held distribution strategy of strong, entrepreneurial, independent dealers.  Since Bucyrus predominantly employed a direct model to sell and support products, we’re beginning the process to transition distribution and support to Cat dealers.   We plan to sell the Bucyrus distribution business to Caterpillar dealers that support mining customers around the world.  While discussions with dealers are just beginning, we estimate the value of the Bucyrus distribution business to be substantial.

“Our dealers are very excited about the Bucyrus acquisition and are ready to move forward with the distribution business. Cat dealers have a proven track record in helping customers realize the highest productivity and lowest owning and operating costs, and many mining customers have told us how important the dealers are to their success,” Wunning added.

Funding

At the time we announced the acquisition, we expected to fund it through a combination of debt, up to $2 billion of new equity, and cash.  As a result of excellent cash flow and an increasingly strong balance sheet, we’re pleased to report that we completed the acquisition without the need to issue equity.  We issued $4.5 billion of new debt on May 24, 2011, at historically low rates.

Synergy Benefits

The purchase of Bucyrus is a great strategic acquisition for Caterpillar.  In the time since the acquisition was announced, we have further validated the assumptions that led to this decision.  The combination of the speed and responsiveness of Bucyrus, along with the process discipline and execution of Caterpillar, will result in a business that will deliver more benefits and value than could be accomplished by either company alone.

The benefits include higher sales of new equipment and aftermarket parts and support, lower product cost and greater reliability driven by the use of Caterpillar engines and components in Bucyrus products and improved service and lower owning and operating costs driven by Caterpillar’s global manufacturing, supply chain and purchasing capabilities.