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Bucyrus buys Terex Mining for $1.3 billion

Terex Mining

Terex has signed a definitive agreement to sell its mining business to Bucyrus International Inc. for US$1.3 billion in cash, creating a premier supplier of mining equipment. The products to be divested by Terex in the transaction include hydraulic excavators, electric drive mining trucks, track and rotary blasthole drills, and the highwall miner, as well as the related parts and aftermarket service businesses, including the company-owned distribution locations.

“This transaction accelerates the transformation of Terex as we move from a construction and mining equipment company to a machinery and industrial products business,” said Ronald DeFeo, Terex chairman and CEO. “Going forward, we will focus on products and services where we can maintain and build superior customer propositions with high returns on capital for our owners. The current environment plus this transaction provide an excellent opportunity to create value. We plan to execute the changes needed to make this happen.”

Mr. DeFeo emphasised “The sale is good for our customers, team members and shareholders. For Terex, the attractive cash offer provides us excellent financial flexibility, as our cash balance will substantially equal our outstanding indebtedness. The US$1 billion of after-tax proceeds will allow Terex to invest in its current, high return-on-capital businesses, or to look to add new, well positioned niche manufacturers with strong market presence to the company’s portfolio.  

He continued, “Mining is a highly capital intensive business. It would take us years to build the infrastructure to service and support new equipment sales in many of the key mining markets around the world where Bucyrus already has significant presence.  We are confident that both companies’ stakeholders will benefit from the transaction, with our mining customers being the ultimate beneficiaries. The journey to make this a great business will accelerate under the leadership of Bucyrus, which has a historically strong presence in surface mining with its rope shovel and dragline products.”

Tim Sullivan, CEO of Bucyrus said: “We are extremely excited about acquiring Terex Mining and we believe that this is a unique opportunity to build an even stronger company for our customers, employees and shareholders. Customers will reap the benefits from this transaction as Bucyrus will be able to offer a broad, complementary product line that is driven by technology, quality, and first class service. Through our extended product offering, we will continue to design and produce world-class machines and provide the best after-market support throughout the life of the equipment. We will expand our geographic footprint and diversify our portfolio of products across a broader range of commodities.”
 
The Terex mining equipment business has 38 facilities around the world with approximately 2,150 employees. As a result of the transaction, Bucyrus will double its addressable market from roughly US$15 billion to over US$30 billion and create a team of approximately 10,000 people in nearly 100 locations around the world.

Under the terms of the agreement, approved by the boards of directors of both companies, Bucyrus will acquire those subsidiaries and assets of Terex used to design, manufacture, and sell hydraulic excavators, surface mining trucks, drills (other than auger drills), highwall miners, and related components, parts, and after-sales service, commonly known as O&K, Unit Rig, Reedrill, Superior Highwall, Halco, and Hypac. Terex may request to receive US$300 million of the purchase price in the form of Bucyrus shares (based on Bucyrus’ current trading price). 

The acquisition, which is not subject to shareholder approval by either company, is subject to certain regulatory approvals and other customary closing conditions and is expected to close during the first quarter of 2010.

In addition to the benefits to be received by customers, the acquisition is expected to yield significant benefits for Bucyrus shareholders. Bucyrus estimates that there are over US$100 million in annual run-rate operating synergies, achievable by 2012. The company has entered into a commitment letter with a group of financial institutions to provide funding necessary for the acquisition through an increase in its existing revolving credit facility and a new term loan facility. The commitment letter also provides for modification of certain terms of Bucyrus’ existing debt.

 
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