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Caterpillar has struck a deal to buy Hong Kong-listed ERA Mining Machinery for US$887 million, in a move aimed at clawing back more of a share of China’s lucrative mining industry.
The Wall Street Journal reports Caterpillar is offering 88 Hong Kong cents a share for the company, a premium of 33% on ERA’s most recent share price.
ERA is a coal mining equipment manufacturer specialising in hydraulic roof supports, and Cat’s takeover represents a bet mining growth in China will continue strengthen.
According to The Wall Street Journal Caterpillar has been losing market share in China, which represents nearly half of world demand for construction equipment.
In 2010 Cat had 7 per cent of China’s excavator market, trailing rivals Komatsu and Sany, which accounted for 15 and 9 per cent respectively.
Last month Caterpillar construction equipment group president Richard Lavin said the company had “undershot” the market in China and needed to catch up.
ERA is the latest acquisition for Cat, which last year also merged with mining manufacturer Bucyrus.
The $8.8 billion Bucyrus deal came into effect in July this year, and combined with the ERA acquisition, represents a growing tide of heavy mining investments despite recent falls in commodity prices.