News | One Equity Partners
Caterpillar acquires Progress Rail

Continued growth in services is an important part of Caterpillar's Vision 2020 Strategy

PEORIA, Ill. - Caterpillar Inc. (NYSE: CAT)acquired rogress Rail Services, Inc. (Progress Rail) for $1.0 billion in cash, stock and assumption of debt. Progress Rail is majority owned by One Equity Partners, a private equity affiliate of JP Morgan Chase & Company, Inc.

Based in Albertville, Alabama, Progress Rail is a leading provider of remanufactured locomotive and railcar products and services to the North American railroad industry. With 2005 sales of $1.2 billion, the company has one of the most extensive rail service and supply networks in North America. It operates more than 90 facilities in 29 states in the United States, Canada and Mexico, with about 3,700 employees.

"This is an important acquisition due to its size and scope. The rail aftermarket services business is a strong fit with our strategic direction and will leverage our remanufacturing capability," said Caterpillar Chairman and Chief Executive Officer Jim Owens. "Progress Rail provides excellent diversified growth to Caterpillar, enhancing our ability to deliver attractive profitability throughout the business cycles."

"I am extremely pleased that Progress Rail is becoming part of the Caterpillar family," commented William P. Ainsworth, president and chief executive officer of Progress Rail. "Progress Rail's success has been attributable to our dedicated employees and commitment to our valued customers, and Caterpillar shares these same values with our company. By leveraging the world-class capabilities of Caterpillar within Progress Rail, the future is bright for our employees, our customers and our business."

Progress Rail offers a full range of reconditioned and remanufactured railcar components, rail and track products, railcar and locomotive repair, rail welding, maintenance of way equipment and railcar dismantling.

"Progress Rail is a leading aftermarket services provider to the rail industry, and this is a premier opportunity for Caterpillar to continue to grow its services portfolio," said Steve Fisher, Caterpillar vice president with responsibility for remanufacturing. "They provide highly integrated solutions, have developed important long-term customer relationships with the railroads and have earned an excellent reputation throughout the industry. We are especially pleased that Billy Ainsworth and the senior management team will join Caterpillar and continue to lead Progress Rail. Together, we will be very well positioned to better serve the rapidly growing railroad maintenance and repair business."

"There are significant benefits as Progress Rail becomes part of Caterpillar," said Steve Wunning, Caterpillar group president. "Progress Rail is very customer focused and brings an extensive network of aftermarket operations in the United States, Canada and Mexico. Together, we will be able to provide a broader array of services to the rail industry and expand outside of North America to the rest of the world. Progress Rail will use Caterpillar's extensive remanufacturing technology and processes to build upon their already superior capability. We expect this transaction to be accretive to our 2006 earnings and exceed our internal hurdle rate."

Under the terms of the agreement, Caterpillar acquired Progress Rail for approximately $800 million in cash and Caterpillar stock, and $200 million through the assumption of long-term debt. Of the approximately $800 million, approximately 53 percent was paid in cash and 47 percent in Caterpillar stock. The transaction closed on June 19, 2006.

Monroe Securities and Lehman Brothers provided the financial advisory services, and Mayer Brown Rowe & Maw provided legal services to Caterpillar. Credit Suisse, JP Morgan and Morgan Stanley provided advisory services, and Morgan Lewis & Bockius provided legal services to Progress Rail.

A question-and-answer section containing additional information about this transaction is located at the end of the release.

Announcement Conference Call
Caterpillar Group President Steve Wunning, Caterpillar Vice President Steve Fisher and Caterpillar Investor Relations Director Mike DeWalt will discussed the acquisition of Progress Rail with financial analysts and institutional stockholders on a one-hour conference call beginning at on Friday, May 19, 2006.