Caterpillar Now A Miner Major

At least one major global corporation is making a very large, very public bet that growth in commodity exploration and extraction is here to stay. Caterpillar (NYSE:CAT) announced a large deal on Monday whereby it is buying mining equipment maker Bucyrus (Nasdaq:BUCY) for $8.6 billion in cash. With this deal, Caterpillar will now get upwards of 20% of its revenue from the mining category and will become the only player in the world that touches every major category of mining equipment. 

The Proposed Deal
By the terms of the deal, Caterpillar will pay $92 per share in cash to the holders of Bucyrus stock. That is a net price tag of $7.6 billion and a 32% premium to Fridays' closing price. This is a robust price for Bucryus by almost any standard. Not only is this is 22% premium to the 2008 boom-time high in the stock, but it values Bucyrus at a trailing EV/EBITDA of over 15, a future EV/EBITDA of nearly 12 and more than double the 2011 revenue estimate for the company. To put this in context, 8 to 10 times EBITDA is generally considered to be a quite healthy forward multiple for this type of company.

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