Bucyrus International will buy Terex' equipment division for $1.3 billion, an example of how consolidation in the mining industry is driving the need for bigger service companies.
It also signifies a shift into precious metals for Bucyrus, which has largely operated in the coal industry.
A bigger equipment company means that miners won't need to contract with numerous suppliers to meet their growing needs, said Bucyrus spokeswoman. Shelley Hickman.
The Terex unit in the sale makes hydraulic excavators, electric drive mining trucks, track and rotary blasthole drills and highwall mining systems.
Bucyrus, based in South Milwaukee, Wis., makes mining equipment for surface and underground mining. The company said late Sunday that the acquisition will double its market.
The deal will also speed Terex Corp.'s goal of transforming itself into a
Terex Corp. said the acquisition speeds up plans to transform itself from a construction and mining company into a machinery company with an industrial focus.
Terex Corp, based in Westport, Conn., can opt to receive $300 million of the purchase price in Bucyrus International Inc. stock, based on its current trading price. Bucyrus has reached a deal with some lenders that will help it pay for the deal by increasing its existing credit agreement and obtaining a new term loan facility. The commitment letter with the lenders also allows Bucyrus to alter certain terms of its existing debt.
Bucyrus will gain about 10,000 employees at almost 100 locations globally. The deal is also expected to provide more than $100 million in annual run-rate savings for the company by 2012. Bucyrus said much of the savings will come from consolidating manufacturing plants, as well as through combining management functions and lowering purchasing expenses.
The boards of both companies have approved the deal, which is expected to close in the first quarter.