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The Globe and Mail

Canada's Finning inks rare diversified takeover

Finning is purchasing the distribution and support side of a Caterpillar business.

With commodities, REITs, and power generation dominating deal flow, it's been a quiet time for Canadian diversified companies.

Because this sector is so rarely talked about, Vancouver's Finning International Inc. made a splash when it announced on Wednesday that is buying a portion of the business that Caterpillar Inc. acquired in its takeover of Bucyrus in 2010. To understand what exactly this business is, you need to know a bit of history.

For years, large mining dealers in the Caterpillar community encouraged the company to expand its lineup of mining products, so it went out and bought Bucyrus. At the time, Caterpillar said it would focus on manufacturing the mining tools that Bucyrus specialized in, because that's what it was good at, and would use its dealer network to support sales.

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Finning has now come along and bought the distribution and support side of this business for a total purchase price of $465-million (U.S.). It ties nicely into Finning's business model because the firm already sells, rents and provides customer support services for Caterpillar equipment and engines.

Finning likes the deal because Bucyrus's makes products for miners - think hydraulic shovels, dozers - and Finning chief executive officer Mike Waites thinks the mining sector will dominate its business in the near future. Bucyrus also derives about two-thirds of its revenue from South America, which is an area in which Finning already has an established network.

Before the transaction, Finning posted annual revenue near $6-billion, and South America accounted for 35 per cent of it. After the deal closes, it should be able to add about $700-million from Bucyrus in 2012.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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