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Caterpillar Gets $115 Million For South African Distribution Business

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(Image: Stock.xchng)
(Image: Stock.xchng)

BUSINESS

  • Barloworld purchasing South African Bucyrus from Caterpillar
  • Sale follows Caterpillar’s usual pattern of selling through distributors
  • Deal to close in third quarter

Caterpillar Global Mining LLC, the world's largest manufacturer of bulldozers, excavators and other earth-moving machinery, will sell a portion of its distribution-and-support business Bucyrus to Barloworld Ltd. for $115 million.

The sale comes less than a year after Caterpillar purchased Bucyrus for $7.6 billion.

Since purchasing Bucyrus in July 2011, Caterpillar has been selling off portions of the business. This latest sales involves locations in South African and Botswana, and affects 470 employees.

Caterpillar’s normal selling approach is to sell through independent distributors who sell and service all of its products. Bucyrus uses a direct sales model, which is the reason Caterpillar has been selling portions of Bucyrus to dealers.

The sale also includes Caterpillar’s agreements with Eqstra NH Equipment Ltd. and Eqstra Botswana Ltd. All total, the sale will cost Barloworld $175 million.

South African based Barloworld is a distributor of earthmoving equipment and power systems, automotive and logistics. Barloworld CEO Clive Thomson says: "This acquisition is perfectly aligned with the group's growth strategy. It builds on our existing strengths and will enhance our leading position in the mining industry by significantly expanding the range of equipment solutions we are able to provide to customers operating across southern Africa."

Pending regulatory approval, the sale should close in the third quarter.

Similar Caterpillar Sales

Caterpillar and Barloworld are in discussions over Bucyrus businesses in Iberia and Russia, two Barloworld distribution territories.

Caterpillar group president Steve Wunning says both companies have a longstanding relationship and look forward to growth created by the South African sale.

Caterpillar has closed two similar transactions in the recent past: one with Sime Darby Industrial for the purchase of Bucyrus businesses in South America; and one with Finning International Inc. for the purchase of Bucyrus businesses in the United Kingdom.

The sale of Bucyrus businesses in Canada to Finning International Inc. is pending as are sales to Ferreyros S.A.A. and WesTrac Pty Ltd.

Key Statistics - Metals and Mining Industry in South Africa (source: MarketLine)

  • In 2010, the metals and mining industry in South Africa had revenue totaling over $42 billion. For the period spanning 2006-2010 this represents a compound annual growth rate (CAGR) of 1.7%.
  • Between 2006 and 2010, industry production volumes increased by a CAGR of 0.3%. In 2010, the industry reached 268 million metric tons.
  • For the five-year period 2010-2015, the industry’s performance is predicted to accelerate. A CAGR of 8% is expected. ?By the end of 2015, the industry is forecasted to be valued at $64 billion.

By Melina Druga for
Melina Druga is an American writer and editor. She is the author of Enterprising Women: Practical Advice for First Time Entrepreneurs.

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