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Caterpillar Makes $820M Railroad Bet

Caterpillar signs an agreement to buy a locomotive maker for $820 million.

PEORIA, Ill. (TheStreet) -- Caterpillar (CAT) - Get Caterpillar Inc. Report agreed to acquire a locomotive manufacturer for $820 million in cash from a pair of private-equity investors as the world's largest heavy-equipment maker looks to beef up its railroad business.

Caterpillar's target this time is Electro-Motive Diesel, which, as its name would suggest, specializes in building electric-diesel locomotives. The company had revenue of $1.8 billion in 2009, according to Caterpillar, which announced the purchase Tuesday in a filing with the

Securities and Exchange Commission


The deal, which requires regulatory approval, isn't expected to close until the end of 2010.

The sellers, Berkshire Partners and Greenbriar Equity Group, acquired EMD from General Motors in 2005 for an undisclosed sum.

Since 2006, Caterpillar has invested $2 billion in the rail industry, including its purchase of Progress Rail. Like

Warren Buffett

, whose

Berkshire Hathaway


TheStreet Recommends

holding company closed its acquisition of the freight line

Burlington Northern Santa Fe

earlier this year, Caterpillar clearly views railroads as a smart play.

>>>Also see: Top-Rated Railroad Stocks

"Rail has proven to be a highly efficient and sustainable method for moving freight and people, and we see a positive long-term future for the continued growth of the rail industry," said Caterpillar's CEO-elect, Doug Oberhelm, in the press release.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.