Caterpillar and Mining Machinery Limited Announce Settlement Agreement Related to Siwei Acquisition
PEORIA, Ill., May 16, 2013 /PRNewswire/ -- Caterpillar Inc. (NYSE: CAT) and Mining Machinery Limited announced today that they have resolved all outstanding issues between them arising out of Caterpillar's acquisition of ERA, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd., commonly known as "Siwei." Caterpillar reached this agreement with two former directors of ERA, Emory Williams and John Lee, and two other parties with an interest in the settlement, Mining Machinery Limited and James Thompson III (collectively the "MML Parties").
"We are pleased to resolve these issues with the MML Parties, which, as we move forward, will position Caterpillar to put greater focus on improving the Siwei operation," said Steve Wunning, Caterpillar group president with responsibility for Resource Industries. "We purchased Siwei as a strategic fit for our coal mining business in China, a country that produces and consumes more coal than any other country in the world," Wunning added. "We remain very committed to supporting the large base of customers in the Chinese mining industry. With the broadest product line and outstanding dealer support, we are well positioned for long-term growth in this important market," Wunning added.
Emory Williams, the former Chairman of ERA, said, "We wish Caterpillar continued success in the China mining sector. We are pleased to conclude this matter and to continue our track record of building successful businesses in China."
As part of the resolution of outstanding issues between the parties, Caterpillar's total outstanding obligations of $164.5 million to the MML Parties, which were part of Caterpillar's obligations relating to its acquisition of ERA, were reduced by $135 million to $29.5 million. In addition, Caterpillar and the MML Parties have mutually released all their claims relating to the acquisition of ERA.
In November 2011, Caterpillar and ERA jointly announced a pre-conditional voluntary offer by Caterpillar, through a wholly-owned subsidiary, for all of the issued shares of ERA, which at that time was a publicly traded company on the Hong Kong Stock Exchange. ERA primarily designs, manufactures, sells and supports underground coal mining equipment in China through its wholly-owned subsidiary, Siwei. In June 2012, Caterpillar announced the completion of its tender offer for ERA.
On January 18, 2013, Caterpillar announced that an internal investigation had uncovered deliberate, multi-year, coordinated accounting misconduct at Siwei leading to a non-cash goodwill impairment charge. Caterpillar's investigation determined that certain Siwei senior managers, one of whom was an ERA director, had engaged in this misconduct and, as a result, Caterpillar removed those responsible. Caterpillar found no evidence that the other former ERA directors or James Thompson III engaged in the accounting misconduct. The settlement concludes the dispute resolution process invoked by Caterpillar.
In addition to entering into the settlement agreement, Caterpillar has agreed that a company affiliated with the MML Parties may purchase from Siwei certain receivables and other assets.
For more than 85 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. With 2012 sales and revenues of $65.875 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services and Progress Rail Services. More information is available at: http://www.caterpillar.com.
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SOURCE Caterpillar Inc.