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Caterpillar Changing the Game Again

|Includes: BUCY, Caterpillar Inc. (CAT)
By Roger Nachman

Caterpillar (NYSE:CAT) is changing the game again, and this is a humongous benefit for shareholders in the long run.

This morning, Caterpillar announced it was buying Bucyrus International, Inc. (NASDAQ:BUCY) for $8.6 billion, including debt. Bucyrus shareholders will receive $92 per share in cash, but the real winners here are Caterpillar shareholders.

While shares of CAT are down in pre-market, this should be used as a buying opportunity for longer term shareholders, as the product expansion into mining equipment will boost CAT's net income tremendously, and the $8-$12 per share target in 2012 that the company has consistently reiterated now looks potentially undervalued.

One drawback to the deal is that Caterpillar used cash, leaving it with a lot less in that department, but it's a shareholder friendly deal, as Doug Oberhelman and crew didn't use shares, which indicates they see the company's shares as undervalued.

Investors would be wise to look into adding or initiating a position in CAT at these levels, and use any dip buying as a gift from the market gods. This thrusts Caterpillar into the mining space, and given Caterpillar's brand cache, the long term benefits will go to CAT holders.

Disclosure: no position in CAT

Disclosure: No position in CAT