Bucyrus makes surprise buy of DBT

In a move that may surprise many, Bucyrus International yesterday signed a definitive agreement to acquire DBT, a subsidiary of RAG Coal International. Bucyrus expects to complete the transaction, which is subject to customary closing conditions and regulatory approvals, at the end of the first quarter of 2007.

This is an intriguing acquisition in many ways, not least in how it mirrors the situation of Bucyrus’s major competitor, P&H and the Joy Global group. Bucyrus and P&H are the two global leaders in the design and manufacture of surface mining equipment like draglines, electric rope mining shovels and rotary blasthole drills. DBT and Joy Mining Machinery are the two leading suppliers of complete system solutions for underground coal and soft rock mining.

DBT, however, has also been moving into the underground hard rock sector with some of its rubber-tyred machines. And, as we noted in the August issue, it is working with Codelco in Chile to develop underground hard rock continuous mining systems. Thus it is perhaps somewhat of a surprise that DBT was not purchased by one of the other underground leaders, like Sandvik Mining & Construction or Atlas Copco.

The combined Bucyrus/DBT company will have a consolidated installed base of equipment of over $20 billion. Tim Sullivan, Bucyrus President and CEO said: “Both companies share a similar culture and history with a focus on technology, delivering high quality products, valued employee relationships and providing first class service to our customers.”

DBT has eight facilities around the world and generates some $1 billion in annual revenue. The Bucyrus/DBT combination will provide significant geographic, product and end market diversification for Bucyrus. In addition to increased scale, DBT will greatly enhance Bucyrus’ market in China as well as in the markets of other countries that Bucyrus describes as “developing” such as Russia and India. Sullivan further commented: “We are very bullish on the long-term fundamentals for coal and this combination will allow us to address 100% of the coal mined on a global basis.”