The world's biggest heavy machinery maker, Caterpillar Inc., announced plans Monday to acquire mining equipment company Bucyrus International for $7.6 billion.
Caterpillar agreed to pay $92 per share for Bucyrus, which represents a 32 percent premium on the Wisconsin-based company's closing price on Friday. Caterpillar also agreed to assume $1 billion in Bucyrus debt, so the deal is valued at $8.6 billion.
Caterpillar's Chairman and CEO Doug Oberhelman talked about the price of the Bucyrus acquisition during a conference call with analysts.
QUESTION: I think you've looked at Bucyrus before, but it sounded like it was always an issue of price. What gave you comfort that you're not a little too late or overpaying at this point?
ANSWER: "Did we overpay? No," Oberhelman said. "In my mind, we paid a fair and full price. Lots of synergy opportunities. No product overlap to speak of. We shared some of the distribution business together already through Cat dealers and shovels. Two big names or three big names in the big equipment Bucyrus is in. We're pretty happy with where we are and the possibility of all of the synergies coming to bear. We have in our analysis exceeded our hurdle rate on this one by a comfortable range. So we feel pretty good about it."