Caterpillar Bid Lifts ERA Mining Shares By 21% In Latest HK Takeover

Shares in Hong Kong-traded ERA Mining Machinery soared by 21% in Hong Kong on Friday after Caterpillar Inc. offered to buy the mining equipment manufacturer for up to $886 million, the latest sign of optimism about China?€™s mining equipment market.

also marks another move by Caterpillar to deepen its involvement Asia?€™s fastest-growing major economy, and follows Chinese government approval this month of the takeover of another Hong Kong-listed, China-focused company, restaurant chain Little Sheep, by a U.S. corporate giant, Yum!. The proposed ERA Mining deal also comes after another proposed large investment in another Hong Kong-listed mining equipment company by Joy Global of Milwaukee earlier this year.

Caterpillar?€™s shares rose by 4.3% in U.S. trading yesterday following word of its expansion in China and elsewhere. The U.S. equipment maker?€™s shares have gained about a fifth in the past year.

ERA?€™s main asset is Zhengzhou Siwei Mechanical & Electric Equipment Manufacturing, a supplier of mining equipment based in China?€™s Henan Province. Caterpillar intends to ?€œbuild on Siwei?€™s strong reputation and relationships in China, further investing in its mining roof support business and operations,?€ according to a statement by Steve Wunning, Caterpillar group president with responsibility for resource industries. Caterpillar will also ?€œbring Siwei?€™s products to more customers outside of China,?€ he said. The Asia-Pacific region as a whole is the world?€™s largest and fastest-growing market for coal.

The mining equipment industry in China has already attracted the country?€™s rich lest man. Sany Heavy Equipment International, whose largest investor Liang Wengen ranked no. 1 on the 2011 Forbes China Rich List, went public in Hong Kong in 2009. Sales in the first six months of 2011 rose to 1.78 billion yuan from 1.31 billion. Sany?€™s shares are little changed in the past year, compared with a 22% plunge in Hong Kong?€™s benchmark Hang Sang Index.

Caterpillar has been expanding actively in China. In August, it said would open to plant in Jiangsu Province to produce components for excavators.

Nasdaq-listed Joy Global of Milwaukee said earlier this year it was looking to acquire about 41% of Hong Kong-listed International Mining Machinery.

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