Cat Settles Issues Surrounding China Deal
Caterpillar Inc. and Mining Machinery Limited announced that they have resolved all outstanding issues between them arising out of Caterpillar's acquisition of ERA, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd. Caterpillar reached the agreement with two former directors of ERA, Emory Williams and John Lee, and two other parties with an interest in the settlement, Mining Machinery Limited and James Thompson III (collectively the MML Parties).
As part of the resolution of outstanding issues between the parties, Caterpillar's total outstanding obligations of $164.5 million to the MML Parties, which were part of Caterpillar's obligations relating to its acquisition of ERA, were reduced by $135 million to $29.5 million. In addition, Caterpillar and the MML Parties have mutually released all their claims relating to the acquisition of ERA.
"We are pleased to resolve these issues with the MML Parties, which, as we move forward, will position Caterpillar to put greater focus on improving the Siwei operation," said Steve Wunning, Caterpillar group president with responsibility for Resource Industries. "We purchased Siwei as a strategic fit for our coal mining business in China, a country that produces and consumes more coal than any other country in the world.We remain very committed to supporting the large base of customers in the Chinese mining industry."
In June of 2012, Cat completed its acquisition of ERA Mining Machinery Ltd. and Siwei, which manufactures, sells and supports underground coal mining equipment in mainland China. But in January, Caterpillar announced that an internal investigation had uncovered deliberate, multi-year, coordinated accounting misconduct at Siwei, alleging that certain Siwei senior managers, one of whom was an ERA director, had engaged in the misconduct. Caterpillar removed those responsible, and said it found no evidence that the other former ERA directors or James Thompson III engaged in the accounting misconduct.
The misconduct at Siwei resulted in a non-cash goodwill impairment charge of approximately $580 million, or $0.87 per share, in the fourth quarter of 2012.Edit Module