Caterpillar moves to buy Chinese company

Updated: 2011-11-15 07:55

By Zhang Yuwei (China Daily)

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HONOLULU - China will continue to be a major overseas market, especially in mining, for the US earthmoving-equipment maker Caterpillar Inc, a top company official has said.

Caterpillar, a leading maker of earthmoving equipment, has made mining one of its priorities for the coming years. On Friday, it offered to buy ERA Mining Machinery, a Chinese maker of mine safety machinery. The sale would require the approval of Chinese regulators.

Richard Lavin, group president of Caterpillar, said at the APEC CEO summit in Hawaii that the $886 million purchase would be "a very strategic acquisition" that would help Caterpillar expand mining equipment sales to other countries.

"It gives us a product platform for entering the mining business in China, where we simply haven't had a presence before. At the same time, for ERA, it gives them access to our global distribution network," said Lavin.

He said the purchase would help Caterpillar benefit from ERA's manufacturing in China and sell the products through distribution networks abroad. ERA Mining Industry could not be reached for comment.

Song Qiushuang, chief engineer of China National Coal Mining Equipment Co Ltd, agreed and said the purchase will be beneficial to ERA Mining Machinery's international development.

"The Chinese company, of course, will get closer to the global capital market and have more opportunities," he said. "Meanwhile, for Caterpillar, the company will pay more attention to the Chinese market."

China uses about 40 percent of the global coal supply and accounts for 70 percent of underground coal mining.

"We look forward to working with ERA, ensuring our operations are world-class in terms of safety," Lavin said. "China is a very attractive mining market, especially in coal. China is one of the largest coal reserves in the world. It is still being developed."

Lavin said the company sees China as a promising market to invest in for the next five to 10 years. Caterpillar has expanded its business aggressively in China over the past 10 years in manufacturing, distribution, supply chains, research and development, with "very few restrictions", he said.

"I think they (the Chinese) are looking for high-production mining technology to help them to be more efficient. Caterpillar has a lot to bring in that regard."

The company also sees opportunities to invest in logistics, rail and power - especially electric power generation - in the Chinese market.

"We find China to be a very good place to invest," Lavin said. "It's very supportive of our plans and our investments. We had to deal with some issues (including intellectual property rights and indigenous innovation regulations), but we see the Chinese government taking real substantive steps to address those issues.

"I know the Chinese government is committed to international standards for intellectual property."

Lavin said he has seen progress since President Hu's visit to the US in January, in which Hu said he would revise regulations on domestic innovation to make the field more open to multinational companies.

Du Juan contributed to this story.

China Daily

(China Daily 11/15/2011 page17)