Caterpillar to take a break from acquisitions

By Reuters
Posted March 23 at 5:43 p.m.

Caterpillar Inc. will likely take a break from acquisitions after reaching three large deals in the past year, executives at the world’s largest maker of heavy equipment said.

The company will be focused on closing its $7.6 billion takeover of mining equipment maker Bucyrus International, and then on integrating that new operation into the rest of its business, Chief Executive Doug Oberhelman said.

“We’re going to be in a hiatus for a while, we want to digest Bucyrus and EMD,” said Oberhelman, who took the top job at the Peoria, Illinois-based company in June.

But in a sign Caterpillar was ready to part with some of its portfolio, it said it had hired bankers to look into selling its third-party logistics business.

“Could we expect more of that?” Oberhelman said. “Yes and no. We’re always looking at the portfolio.”

But a sale of that unit coupled with stronger-than-expected cash flow in 2010 and early 2011 could allow it to close the Bucyrus deal without issuing new shares, Chief Financial Officer Ed Rapp said.

In addition to the Bucyrus deal, due to close later this year, Caterpillar in October spent $810 million on MWM Holding, a German maker of gas and diesel engines, and over the summer bought EMD, a U.S. maker of train locomotives, for $820 million.

The Bucyrus acquisition will greatly expand Caterpillar’s portfolio of mining equipment — making it a more powerful competitor to Joy Global Inc. — while the EMD deal brought it into head-to-head combination with fellow U.S. blue chip General Electric Co.

Caterpillar shares closed down 3 cents at $106.76 on the New York Stock Exchange, shortly after their presentation began in Las Vegas.

Caterpillar also repeated its 2011 profit forecast, which calls for earnings near $6 per share, representing growth of about 45 percent from last year.

Analysts, on average, look for the world’s largest maker of heavy equipment to earn $6.12 per share this year, according to Thomson Reuters I/B/E/S.

It also repeated its goal of earning $8 to $10 per share on $55 billion to $60 billion in revenue in 2012. Neither the 2011 or 2012 targets include results from Bucyrus.

The company plans to invest $5 billion by 2015 to expand its production capacity. In Asia alone, it aims to be able to produce 180,000 pieces of heavy equipment in the region by the end of 2015, up from a capacity of about 68,000 at the end of 2010.

Caterpillar shares have risen about 78 percent over the past year, sharply outpacing the 11 percent rise of the Dow Jones industrial average as demand for its equipment has snapped back after the recession.

Caterpillar’s competitors include Japan’s Komatsu Ltd., South Korea’s Doosan Infracore and Deere & Co. of the United States.

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