Bucyrus to pay $731M for German underground mining equipment firm
Bucyrus International Inc. has agreed to buy German company DBT GmbH for $731 million in cash and stock in a deal that takes the South Milwaukee surface mining equipment maker into the underground mining market.
DBT, is based in Lunen, Germany, and manufactures underground equipment including roof support systems, armored face conveyers, plows, shearers and continuous miners used primarily by customers who mine coal. The acquisition will enhance Bucyrus’ market in China as well as in the markets of other developing countries such as Russia and India, said Bucyrus president and chief executive officer Tim Sullivan.
Sullivan said the combination, Bucyrus’ largest acquisition in its history, will provide significant geographic, product and end-market diversification for Bucyrus.
“We are very bullish on the long term fundamentals for coal and this combination will allow us to address 100 percent of the coal mined on a global basis,” Sullivan said in a press release.
In a research note Monday, Robert W. Baird & Co. analyst Robert McCarthy said the deal “adds a relatively stronger penetration of the coal mining market in the critical China market.” McCarthy said the transaction makes “tremendous strategic sense.”
Shares of Bucyrus (NASDAQ: BUCY) jumped $3.76, or about 9 percent, to $46.49 in early trading Monday. Bucyrus announced the agreement Sunday afternoon.
DBT has eight facilities around the world with approximately 3,200 employees and generates approximately $1 billion in annual revenue.
Bucyrus, a manufacturer of surface mining equipment, reported revenue of $532 million through the first nine months of 2006. The company produces walking draglines, electric rope mining shovels and rotary blasthole drills used for surface mining.
DBT is a subsidiary of RAG Coal International, Essen, Germany. Under terms of the transaction agreement, Bucyrus will pay $710 million in cash and issue to RAG 471,476 shares with a market value of $21 million, based on Bucyrus’ average closing price for the 20-day trading period ended Dec. 14. The transaction is expected to be completed at the end of the first quarter of 2007. The transaction is subject to customary closing conditions and regulatory approvals, but not the approval of Bucyrus shareholders.
Bucyrus will own 49.9 percent of a holding company formed with private German investor, the Hamburg Trust, but have total controlling interest in DBT. Bucyrus is funding the purchase price and will be entitled to 100 percent of the dividends and cash flow of DBT. Bucyrus has also agreed to buy all of the holding company shares held by the Hamburg Trust by no later than 2009 for 8 million euros, about $10.5 million, half of which has been paid by RAG.
Bucyrus and the Hamburg Trust will honor the prior commitments made by DBT with its German workers regarding facility and employee matters.
Bucyrus has received a financing commitment from Lehman Brothers to support the transaction’s cash purchase price as well as a permanent financing structure that will include a combination of debt and equity securities consistent with achieving a conservative capital structure. Lehman Brothers acted as the sole financial advisor to Bucyrus in the transaction.
