Berkshire, Greenbriar Selling Electro-Motive Diesel for $820 Million

Progress Rail Services, a unit of Caterpillar, has agreed to acquire Electro-Motive Diesel, a provider of locomotive products, from Berkshire Partners and Greenbriar Equity Group. The deal is valued at $820 million in cash.

PRESS RELEASE

Progress Rail Services has signed a definitive agreement to purchase Electro-Motive Diesel (EMD) for $820 million in cash from Berkshire Partners LLC and Greenbriar Equity Group LLC.  Upon completion of the transaction, EMD will become a wholly-owned subsidiary of Progress Rail.   Progress Rail is a wholly-owned subsidiary of Caterpillar Inc. (NYSE: CAT).  

“This acquisition represents the latest step in our strategic plan to aggressively grow our presence in the global rail industry,” said Caterpillar Vice Chairman and CEO-Elect Doug Oberhelman.  “Including today’s announcement and our acquisition of Progress Rail, Caterpillar has invested about $2 billion since 2006 to grow our profitable rail and transit businesses. Rail has proven to be a highly efficient and sustainable method for moving freight and people, and we see a positive long-term future for the continued growth of the rail industry.”

Progress Rail Services is one of the largest providers of rail and transit products and services in North America, including: locomotive upgrade and repair, railcar remanufacturing, trackwork, rail welding, rail repair and replacement, signal design and installation, maintenance of way equipment, parts reclamation and recycling.

“The acquisition of EMD will enable us to provide rail and transit customers an industry-leading range of locomotive, engine and emissions solutions, as well as unmatched aftermarket product and parts support and a full line of rail-related services and solutions,” said Progress Rail CEO Billy Ainsworth.  

With 2009 revenues of $1.8 billion, EMD has the largest installed base of diesel-electric locomotives in the world and offers the most extensive range of locomotive products in the rail and transit industry.  

“We feel this is an ideal fit for EMD and our customers and we look forward to developing and providing an even greater portfolio of products and services for the rail and transit industry that we have proudly served for more than 85 years,” said John S. Hamilton, president and CEO of Electro-Motive Diesel.  

“We are very proud to have had the opportunity to partner with EMD’s management in rebuilding this rail industry icon,” said Regg Jones, managing partner of Greenbriar. “Having redirected the company’s strategy and restored EMD back to strong operating and financial footing, we are confident EMD will continue its growth and success with Progress Rail.”

Richard Lubin, managing director of Berkshire Partners, added, “Our objectives coming in were to transition EMD to a strong, independent company focused on its customers, invest in EMD’s technology and capabilities and drive operational improvement. We are delighted Progress Rail will be the new owner of this business.”

The acquisition is expected to close by the end of 2010, pending final regulatory approvals.  EMD will remain headquartered in LaGrange, Ill.  John Hamilton will continue as president and CEO of EMD and will report to Billy Ainsworth.

About Progress Rail:

Progress Rail Services, a wholly-owned subsidiary of Caterpillar Inc., is a leading supplier of remanufactured locomotive and railcar products and services to the railroad industry, operating one of the most extensive rail service and supply networks in North America. We serve our customers through a network of more than 125 locations across the United States, Canada, Mexico, Brazil, Italy, Germany and the United Kingdom, with more than 4,300 employees. Progress Rail Services is headquartered in Albertville, Ala. For more information, visit www.progressrail.com.

About Electro-Motive Diesel, Inc.:

Founded in 1922, Electro-Motive (EMD) is one of two U.S. original equipment manufacturers of diesel-electric locomotives. Headquartered in LaGrange, Ill., with additional facilities in London, Ontario, and San Luis Potosi, Mexico.  EMD designs, manufactures and sells diesel-electric locomotives for all commercial railroad applications and has sold its products in more than 70 countries worldwide. The company is the only diesel-electric locomotive manufacturer to have produced more than 70,000 engines and has the largest installed base in both North America and worldwide. In addition to its manufacturing activities, EMD has an extensive aftermarket business offering customers replacement parts, maintenance solutions, and a range of value-added services. The company is also a global provider of diesel engines for marine propulsion, offshore and land-based oil well drilling rigs, and stationary power generation. Additional information can be found at: www.EMDiesels.com.

About Caterpillar:

For more than 85 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent.  With 2009 sales and revenues of $32.396 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines.  The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services.  More information is available at: www.cat.com.

About Berkshire Partners LLC:

Berkshire Partners, the Boston-based private equity firm, has invested in leading mid-sized companies for over 25 years through seven investment funds with aggregate capital of $6.5 billion. Berkshire has developed specific industry experience in several areas including retailing, consumer products, manufacturing, transportation, energy, business services and communications. Representative investments include Amscan/Party City, Bare Escentuals, Carter’s, Crown Castle International, NEW Asurion and TransDigm. Since the mid-1980s, Berkshire has invested in over 100 companies with approximately $20 billion of acquisition value and combined revenues of over $22 billion. Berkshire seeks to invest $50 to $500 million of equity capital in each portfolio company. For additional information, visit www.berkshirepartners.com.

About Greenbriar Equity Group LLC:

Greenbriar Equity Group LLC, a private equity firm with $1.5 billion of committed capital, focuses exclusively on the global transportation industry, including companies in freight and passenger transport, aerospace and defense, automotive, logistics, and related sectors.  Greenbriar invests with superior management teams who are interested in being significant equity owners in their companies as well as with corporate partners who are interested in raising capital.  Greenbriar’s managing partners bring many decades of experience at the highest levels within the transportation industry. Additional information may be found at www.greenbriarequity.com.