NEW YORK, Dec 21 (Reuters) - Shares of heavy machinery makers Bucyrus International Inc BUCY.O and Terex Corp (TEX.N) both rose about 7 percent in early trading on Monday, a day after the companies said Bucyrus would pay $1.3 billion for Terex’s mining business.
Bucyrus shares gained $3.75 to $54.59 on the New York Stock Exchange. Terex shares rose $1.35 to $20.55.
The unit being sold, which includes hydraulic mining excavators and electric drive mining trucks, has 38 facilities around the world with approximately 2,150 employees.
Bucyrus, whose competitors include Joy Global Inc JOYG.O and Caterpillar Inc (CAT.N) said the deal would create a “premier supplier of mining equipment.” Bucyrus will add product lines that include hydraulic shovels, drills, and electric mining trucks. The deal is expected to close next quarter. [ID:nN20200814]
Terex will redeploy the capital from the sale within its existing businesses, as it focuses on its crane, construction equipment and aerial work platform businesses. It said the mining business would have required substantial investment in order to grow, including in its distribution network, which Bucyrus already has in place.
“This is one of those unusual circumstances where this transaction is a win-win for both companies,” Terex Chief Executive Ron DeFeo said on a conference call. “The potential to double our business exists by 2013, and that is what we’re targeting.”
Terex, said it aimed to double its net sales by 2013 and could reach earnings of $6 per share even without doing acquisitions. Sales totaled $9.9 billion last year and $3.9 billion in 2009 so far.
The mining segment accounted for about 15 percent of Terex’s 2008 sales and 23 percent of its operating profit, according to presentation materials. But Terex said mining accounted for a higher percentage of its working capital over the past five years.
Reporting by Nick Zieminski, editing by Dave Zimmerman