Caterpillar to Buy Rail Outfit

A JPMorgan private equity arm is the seller.
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Construction-equipment maker

Caterpillar

(CAT) - Get Report

agreed to acquire closely held Progress Rail Services for $800 million in cash and stock from a

JP Morgan Chase

(JPM) - Get Report

private equity affiliate.

Under the terms of the agreement, Caterpillar will pay 53% in cash and 47% in stock. The company will also assume long-term debt of $200 million, bringing the total value of the transaction to $1 billion.

The transaction is expected to be accretive to 2006 earnings. The deal, subject to regulatory approvals, will close around the end of second quarter.

Progress Rail, a provider of remanufactured locomotive and railcar products and services to the North American railroad industry, had sales of $1.2 billion in 2005. It operates more than 90 facilities in 29 states in the U.S., Canada and Mexico, with about 3,700 employees.

"This is an important acquisition due to its size and scope. The rail aftermarket services business is a strong fit with our strategic direction and will leverage our remanufacturing capability," Peoria, Ill.-based Caterpillar said.

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