NEW YORK (TheStreet) -- Caterpillar's (CAT) - Get Report $7.6 billion acquisition of mining-equipment maker Bucyrus (BUCY) , announced in October, may have attracted the heightened scrutiny of antitrust regulators at the Department of Justice, but few industry observers expect much interference from the government as the deal nears completion.
Antitrust watchdogs have sought further documentary material from both companies, a process known as a "second request" in regulatory lingo. Caterpillar CEO Doug Oberhelman told
Thursday that the request "wasn't unexpected." He still foresees the deal closing in the middle of 2011, as the companies have anticipated from the beginning, he said.
Caterpillar and Bucyrus disclosed the DoJ request in filings with the
Securities and Exchange Commission
Caterpillar has been keen to enlarge its lineup of its mining equipment as a boom in commodities prices has driven mineral extractors around the world to expand their mining operations. The rolling machinery giant -- the world's largest manufacturer of such gear --
surprised Wall Street with the Bucyrus announcement
in October, but Caterpillar's mining sales have done so well over the last year that most industry observers felt, in retrospect, that an acquisition of this kind was almost a fait accompli.
Regulators are likely examining what overlap may exist between the two companies' offerings. Caterpillar and Bucyrus say it's limited. Analysts agree. Charles Yengst, a consultant to the heavy-equipment industry, said the redundancy is limited to mining trucks, the huge dump-truck-like vehicles that haul rubble to and fro inside open-pit mines.
But Bucyrus's line of such trucks is relatively small -- bringing in sales of about $200 million a year, Yengst estimates, compared with the multiple billions in sales that Caterpillar brings in from its mining trucks, arguably company's crown jewel. (The company dominates the mining-truck business, controlling half the world's market share.)
The overlap won't cause much alarm to regulators examining the Bucyrus acquisition, Yengst said. "I can't imagine they'd throw the whole thing out because of those trucks."
If anything, analysts say, regulators may ask Bucyrus to sell off its truck business before the government approves the Caterpillar acquisition. "Even if they had to spin that off, it wouldn't be a problem," said Alex Blanton, senior analyst at Clear Harbor Asset Management in New York. "It's too small to make any difference at all.
Not long after striking the deal with Bucyrus, Caterpillar discontinued plans to re-enter the hydraulic shovel business. Bucyrus, based in South Milwaukee, Wisc., already has a line of world-renowned shovels, a business that Bucyrus gained when it bought the mining-equipment unit of
in late 2009.
Caterpillar is set to report fourth-quarter results next week, on Jan. 27.
-- Written by Scott Eden in New York
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