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Bucyrus Goes Underground

Posted on December 18, 2006

In a move that significantly expands its market potential, Bucyrus International Inc. said it would buy DBT GmbH, a unit of German coal mining group RAG, for $731 million in cash and stock.

Bucyrus, which makes equipment used in surface mining, such as walking draglines, electric rope mining shovels and rotary blasthole drills, said the move would enable it to expand into underground mining equipment such as roof support systems, armored face conveyers, plows, shearers and continuous miners.

The combined company, now serving both the surface and underground mining industries and with over 100 years of experience, will have a consolidated installed base of equipment of over $20 billion. "We are extremely excited about combining Bucyrus with DBT and we believe that this is a unique opportunity to jointly build a stronger company for our customers, employees and shareholders,” said Tim Sullivan, president & CEO of Bucyrus. “Both companies share a similar culture and history with a focus on technology, delivering high quality products, valued employee relationships and providing first class service to our customers."

The Bucyrus/DBT combination will provide significant geographic, product and end market diversification for Bucyrus, the company said. In addition to increased scale, DBT will greatly enhance Bucyrus’ market in China as well as in the markets of other developing countries such as Russia and India. "We are very bullish on the long term fundamentals for coal and this combination will allow us to address 100% of the coal mined on a global basis," Sullivan said.

DBT, with eight facilities around the world and about 3200 employees, generates about $1 billion in annual revenue. It is part of RAG, which has said it plans to go public next year. The purchase by Bucyrus, made with $710 million in cash and about $21 million in stock, is expected to be completed by the end of the first quarter of 2007.

Bucyrus will buy DBT in two stages, forming a holding company with private German investor Hamburg Trust in which Bucyrus owns all the voting shares and 49.9% of the capital.

Bucyrus is funding the purchase price and will be entitled to the dividends and cash flow of DBT. It will buy out the Hamburg Trust by 2009, the company said.

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