Under a share redemption plan Caterpillar will become the majority shareholder in Shin Caterpillar Mitsubishi (SHM) with an option to achieve full ownership after five years. The agreement will result in Caterpillar owning 67 percent of SCM. When the first phase of the deal closes, expected in the third quarter of 2008, the business will be renamed Caterpillar Japan.
The value of the first phase of the share redemption is $50 billion Japanese Yen, or approximately $ 499,650,244 dollars, at the current exchange rate. Under the terms of this agreement, SCM will redeem half of MHI’s shares in SCM. Once this share redemption is complete, Caterpillar will own 67 percent of the outstanding shares of the business with MHI owning the remaining 33 percent. SCM also has an option to redeem the remaining shares owned by MHI making Caterpillar the sole owner of SCM if exercised after five years.
Caterpillar Chairman and CEO Jim Owens, MHI President Kazuo Tsukuda, and SCM President Shouichi Hirano all signed the definitive agreements at a ceremony in Tokyo. Shouichi Hirano is expected to become the President of Caterpillar Japan.
“This is a strategic decision for Caterpillar, and it is an important part of our comprehensive business strategy for competing and winning in the rapidly expanding emerging markets of Asia and the Commonwealth of independent States,” says Jim Owens. “Our joint venture with Mitsubishi Heavy Industries has been remarkably successful, and moving forward, I’m confident that as SCM is fully integrated with Caterpillar’s core operations, our customers will see greater benefits from this agreement.”