Caterpillar to buy Amazon.com? Anything is possible in the crazy world of acquisition rumors

Diesel Progress North American Edition, June, 1999 by Charles R. Yengst

Almost every day, I get a phone call asking if I've heard about the latest acquisition. The rumor that comes in the most is about Caterpillar - it's always getting ready to acquire Case Corp. or Case's Agricultural Equipment Division or Case's whatever.

I've heard that rumor so often it's laughable. Everyone seems to be an expert on Caterpillar's business, and they all seem to have their fingers on the "pulse of the company."

If Caterpillar management ever decides to move ahead with an acquisition of Case - or the other way around - I hope I get some advance warning so I can stop telling people that it will never happen. These two companies are just not meant for each other.

Certainly, Caterpillar has made some strategic changes in recent years - the biggest being the acquisition of Perkins Engines in the U.K. Also, F.G. Wilson, the big U.K. gen-set manufacturer, was pulled into the fold early this year.

Going back to Case, it's doing its best to add companies to its own brood. Over the past three years, a number of purchases have been made - some here in the U.S. and a few in Europe. Fermec, Steyr, Austoft, Bor-Mor, Tyler Industries, Gem Sprayers, Concord and DMI have all become part of the Case family. Furthermore, Case has made a big alliance with Sumitomo Construction Machinery. Co., which included the purchase of a 50 percent interest in Sumitomo's Link-Belt operation in North America. So Case has been, and is, very active on the acquisition trail.

Deere is a company that constantly comes up in questions. I'm always hearing rumors that "Deere is selling its Construction Equipment business, and the announcement is going to be made tomorrow!" Of course, "tomorrow" never comes, but the rumors persist. If I had a dollar for every time I've heard that one, I'd have enough money to buy Deere myself.

Deere isn't going to sell its Construction Equipment business - no more than it's going to sell its Agricultural Equipment business or its Consumer/Commercial Products group. Why would Deere buy a third interest in Bell Equipment in South Africa if it were going to get out of the construction equipment business? The simple answer is, it wouldn't! The company would be busy cleaning up its own house to make it (Construction Equipment) look more palatable, not adding more clutter.

As long as we're talking about companies and acquisitions, how about Terex? Now here's a company with a checkered past, but one that has turned into a prince after being a frog for a long time. And it's been buying companies left, right and sideways - PPM of France, O&K Mining of Germany, Baraga Products, American Crane, Simon Access, Payhauler, Italmacchine and recently Amida Industries. Terex has been on a buying binge, and there is no telling where it will show up next.

And let's not forget Volvo. The Swedish company has more cash than God these days and everyone is speculating on its next target. JCB was rumored as a potential acquisition just before ConExpo in March, but that has practically no possibility of flying. If Volvo needs a backhoe loader and a skid-steer loader for its product line, the company can design its own for a lot less than it would cost to buy JCB.

Last year, Volvo bought Samsung Construction Machinery in Korea. Before that, it acquired Champion Road Machinery in 1997. Further back, it acquired Pel-Job of France and Zettelmeyer of Germany.

Following the sale of its automobile division to Ford, Volvo came into very large money - something like $6.5 billion. Whether or not all of that money is available for acquisitions is hard to say, but Volvo is well set to make a few more purchases with its nest egg. I think the company will go for a North American-based truck OEM and supplement its construction equipment line when opportunities arise with small companies.

I know that I have had some fun here - I hope no one will take it too seriously - but if any of the rumors I've spoken of come true, it's pure coincidence.

There are several good questions arising from all the acquisitions that have occurred. How will these bigger, more consolidated, super companies handle their respective sales of bigger and broader product lines in the future and how will they support their sales in the aftermarket? Will the dealer organizations of today eventually give way to the rental houses of tomorrow? Or, will everyone in the off-highway market turn to the Internet somewhere down the road to buy, sell and/or auction equipment? Wouldn't it be wild if you opened the Wall Street Journal some day and read that Caterpillar had just purchased Amazon.com so that it could start selling its machines and engines direct to its customers? Don't laugh. It might not be as far-fetched as it seems!

Charles R. Yengst is president of Yengst Associates, Wilton, Conn. The web address is www.yengstassociates.com. e-mail is yengst@netaxis.com