Sterne Agee Comments On Caterpillars Acquisition Of Bucyrus

Caterpillar

has agreed to acquire 100% of Bucyrus International

for $92 per share or for a total value of $8.6B. The price represents a 32% premium to BUCY's closing price on November 12. The target closing is mid 2011. CAT is expected to realize more than $400M in annual synergies starting in 2015 including manufacturing, purchasing and engineering synergies. Acquisition is expected to be accretive to CAT's earnings in the first full year excluding ~ $0.50 per share of deal-related charges. CAT Mining worldwide HQ will be based in South Milwaukee, WI. The break-up fee is just under 3% of the price or approximately $200-$225M. The deal was apparently completed in about 60 days. CAT has been very aggressive since CEO Doug Oberhelman took over this year including major capacity additions and several acquisitions. Sterne Agee has a Neutral rating and $87 PT on CAT CAT is trading lower at $81.62