When: Today, Monday, Nov. 15th at 8:45AM ET
Where: CNBC's "Squawk Box"
Following is an unofficial transcript of a First on CNBC interview with Caterpillar Chairman & CEO Doug Oberhelman today on CNBC's "Squawk Box" at 8:45am ET.
All references must be sourced to CNBC.
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KERNEN: CATERPILLAR BUYING MINING EQUIPMENT MAKER BUCYRUS FOR $7.6 BILLION IN CASH. $92 A SHARE. THE DEAL INCLUDES AN ASSUMPTION OF ABOUT A BILLION DOLLARS IN DEBT. THAT IS A 32% PREMIUM FOR BUCYRUS SHAREHOLDERS. JOINING US NOW, CATERPILLAR CHAIRMAN AND CEO DOUG OBERHELMAN. WE HAVE PAUL RYAN, THE CONGRESSMAN FROM WISCONSIN, HE'S EXCITED TODAY. I THINK WE UNDERSTAND THE RATIONALE, BUT YOU CAN CERTAINLY GO INTO IT FOR US. WHAT -- I KNOW IT'S WOULD HAVE, SHOULD HAVE, COULD HAVE, BUT A YEAR AND A HALF AGO IF YOU COULD HAVE BOUGHT THIS FOR SO MUCH LESS, I GUESS THE FUTURE IS SO BRIGHT YOU DECIDE WE HAVE TO HAVE TO THOUGH IT'S EIGHT OR NINE TIMES WHAT IT WAS A COUPLE YEARS AGO?
OBERHELMAN: WELL, IT IS A VERY BRIGHT FUTURE FOR MINING, AND WE IDENTIFIED EARLIER THIS YEAR THAT THE MINING SEGMENT FOR US IS A KEY STRATEGIC AREA. WE'RE HEARING FROM CUSTOMERS ALMOST DAILY ABOUT PLEASE HELP US IN THIS MARKETPLACE. THE DEMAND FOR MINERALS, FOR COALS FOR LOTS OF THINGS THAT COME OUT OF THE GROUND WILL BE INCREASING AS URBANIZATION OCCURS. WE SAT DOWN AND LOOKED AT IT AND FELT NOW IS THE TIME AND INTEREST RATES AND FINANCING ARE VERY ATTRACTIVE AND WE'RE VERY PLEASED HERE THIS MORNING.
SORKIN: ONE OF THE THINGS I FOUND FASCINATING ABOUT THE RELEASE, IS YOU SAID THAT YOU'RE GOING TO BE FUNDING THIS FROM YOUR BALANCE SHEET DEBT AND UP TO 2 BILLION IN EQUITY. HOW MUCH MONEY ARE YOU TAKING FROM THE BANKS? I CAN SEE JP MORGAN IS WORKING WITH YOU. WHAT KIND OF RATE ARE YOU GETTING? WE'RE TALKING ABOUT FREE CASH THESE DAYS AND HOW CHEAP IT ULTIMATELY IS.
OBERHELMAN: CERTAINLY THE INCREMENTAL COST OF FINANCING TODAY IS PRETTY LOW. WE'LL BE BRIDGING THIS LOAN WITH JP MORGAN AND PUSHING IT OUT TO OUR NORMAL SYNDICATED BANK LOAN LINES OF CREDIT LATER ON AS WE GET GOING AND WE WILL BE ISSUING UP TO ABOUT $2 BILLION OF NEW SHARES TO THE PUBLIC AT CLOSING TIME. SO ALL IN ALL OUR GOAL WAS TO MAINTAIN OUR CREDIT RATING WHICH IS IN A MID-A RANGE, WHICH WE WILL DO. WE ARE AT THE EARLY, I THINK, BEGINNING OF THE CYCLE, AND OUR CORE BUSINESS AND IN MINING. WE SHOULD BE WELL OUT IN FRONT OF THIS AS WE GO FORWARD IN THE NEXT FEW YEARS.
REP. RYAN: DOUG, PAUL RYAN, I REPRESENT THE MILWAUKEE METRO AREA. SO I HAVE A COUPLE OBVIOUS QUESTIONS. OBVIOUSLY YOU'RE IMPRESSED WITH MANAGEMENT OTHERWISE YOU WOULDN'T BE BUYING THIS COMPANY. WHAT DOES THIS MEAN FOR JOBS IN MILWAUKEE AND MANAGEMENT IN MILWAUKEE?
OBERHELMAN: GOOD MORNING, CONGRESSMAN, PLEASED TO SEE YOU ON THE SHOW THIS MORNING. GREAT TIMING. WHAT IT MEANS IS ESSENTIALLY CATERPILLAR IS COMING TO MILWAUKEE AND WISCONSIN. BUCYRUS IS NOT LEAVING. WE WILL BE MOVING A FAIRLY SELECT NUMBER OF SENIOR LEVEL EXECUTIVE TYPE JOBS TO MILWAUKEE OVER THE NEXT COUPLE OF YEARS. WE INTEND TO KEEP THE HEADQUARTERS FOR OUR GLOBAL MINING BUSINESS RIGHT THERE IN MILWAUKEE. WE LIKE THE FACILITIES. WE LIKE THE PEOPLE. WE THINK IT WILL SERVE US VERY, VERY WELL AS WE GO FORWARD INTO THIS BUSINESS IN A LOT BIGGER WAY.
REP RYAN: SO CONSOLIDATION INTO MILWAUKEE AND NOT OUT OF MILWAUKEE, AND PEORIA. WHICH WE LOVE PEORIA, DON'T GET ME WRONG. THE CULTURES ARE VERY SIMILAR BETWEEN OUR TWO TOWNS. BUT YOU SEE EMPLOYMENT INCREASING IN MILWAUKEE AS A RESULT OF THIS TRANSACTION?
OBERHELMAN: I DON'T SEE IT DECREASING THAT MUCH. IT'S HARD TO SAY, IT'S EARLY, IT'S OUR FIRST DAY. BUT CERTAINLY WE WILL RELOCATE OUR MINING HEADQUARTERS AND EXECUTIVE OFFICES OF THAT TO MILWAUKEE. I WOULD SAY THAT WITH THE INCREASED DEMAND WE SEE, THE LONG-TERM BRIGHT OUTLOOK FOR MINING, THE FUTURE IN MILWAUKEE FOR OUR COMPANY AND BUCYRUS UNTIL WE CLOSE SHOULD BE PRETTY BRIGHT.
QUICK: DOUG, THIS IS THE LARGEST DEAL THAT CATERPILLAR HAS EVER UNDERTAKEN THAT IS WHAT STANDARDS & POORS TELLS US. IS THAT TRUE?
OBERHELMAN: THAT IS TRUE.
QUICK: SO THIS IS A PRETTY BIG BET
OBERHELMAN: IT'S A BIG DEAL.
QUICK: AND YOU'RE WILLING TO PUT A SIGNIFICANT CHUNK OF YOUR COMPANY INTO THIS ARENA. OUR QUESTION IS, WE'VE BEEN TALKING ABOUT QE II, THE FED AND THE LOOSE MONEY POLICY, HOW THAT'S BEEN PUSHING A LOT OF THE COMMODITIES HIGHER. DO YOU WORRY AS THEY TRY TO SCALE BACK ON THEIR BALANCE SHEET THAT THAT WILL CAUSE COMMODITY PRICES TO DROP?
OBERHELMAN: THE DAY-TO-DAY UPS AND DOWNS OF THE COMMODITY MARKETS ARE A FACTOR BUT WHAT WE LOOKED AT IN THIS DEAL AND WHY WE LIKE MINING SO MUCH IS ESSENTIALLY THE MASS URBANIZATION OF NUMBERS OF PEOPLE WE'VE NEVER SEEN IN THE HISTORY OF THE WORLD AND THAT'S NOT OVERLY DRAMATIC AT ALL. BUT IF YOU LOOK AT CHINA, INDIA, BRAZIL, PARTS OF AFRICA AND THE DRIVE FOR MODERNIZATION AND URBANIZATION, THE DRIVE FOR THE BASICS OF LIFE IN MANY WAYS, MINING IS AT THE VERY BASE OF THAT. THAT'S REALLY WHAT WE'RE MAKING THIS BET ON IS THE LONG-TERM FUTURE THAT THAT WILL CONTINUE AROUND THE WORLD. WHICH WE THINK IT WILL. I THINK IT'S A VERY ATTRACTIVE INDUSTRY TO BE IN. IT'S ONE OF TWO OR THREE WE REALLY LIKE. WE MADE AN ANNOUNCEMENT A COUPLE OF WEEKS AGO AN A NATURAL GAS ENGINE COMPANY FROM GERMANY. THAT'S ANOTHER INDUSTRY WE LIKE.WE'RE PLAYING TO OUR STRATEGY. LONG TERM THESE WILL BE GREAT BETS DOWN THE ROAD. WE WILL SEE FLUCTUATIONS AS WE ALWAYS DO SHORT TERM AND DAY-TO-DAY.
SORKIN: DOUG YOU JUST TOLD THE CONGRESSMAN ABOUT JOBS AND KEEPING THEM IN MILWAUKEE BUT AT THE SAME TIME THERE ARE $4 MILLION IN SYNERGIES YOU'RE TALKING ABOUT BY 2015. WHERE ARE YOU GOING TO GET THOSE SYNERGIES FROM ULTIMATELY?
OBERHELMAN: THESE REALLY PROVIDES OUR COMPANY THE BROADEST PRODUCT RANGE OF ANY MINING SUPPLIER TO OUR CUSTOMERS WORLDWIDE. WE CAN GO ALL THE WAY FROM TRUCKS AND SHOVELS, HYDRAULIC SHOVELS TO DRAG LINES TO DRILLS, UNDERGROUND BLASTING DRILLS TO UNDERGROUND COAL MINING DRILLS TO COAL MINING EQUIPMENT. SO WE REALLY NOW HAVE AN OFFERING THAT WE CAN CONSOLIDATE THROUGH OUR DEALERS AND TAKE OUR PRODUCT SUPPORT MODEL THAT WE DO SO WELL WITH OUR CATERPILLAR DEALERS AROUND THE WORLD TO OUR CUSTOMERS AND GIVE THEM ONE SUPPLIER FOR A VERY BROAD RANGE.
SORKIN: SO SYNERGY IS NOT CODE FOR SAVINGS?
OBERHELMAN: SYNERGIES ARE NOT CODE FOR SAVINGS IN THIS CASE. WE WILL ALWAYS LOOKS FOR THOSE IN COST CONTROL OF COURSE, BUT THIS IS REALLY TWO COMPANIES THAT DON'T OVERLAP THAT MUCH AND WE'RE GETTING THREE OUT OF TWO PIECES.
REP RYAN: SO YOU GUYS MAKE ARTICULATED HAULERS, YOU'VE GOT BIG DOSSIERS LIKE D-10s, YOU'VE GOT SCRAPERS -- THOSE ARE COMPLEMENTARY TO THE MINING INDUSTRY. BUT WHAT OVERLAP OCCURS BETWEEN THESE TWO COUNTRIES OR IS THERE NOT THAT MUCH OVERLAP? I KNOW YOU DONT MAKE DRAG LINES AND BIG SHOVELS AND STUFF LIKE THAT BUT ARE THERE PRODUCT OVERLAPS THAT OCCUR HERE AND WHAT IS GOING TO BE THE SHAKE-OUT BETWEEN THOSE TWO?
OBERHELMAN: THERE WAS NO PRODUCT OVERLAP TODAY AND THAT WAS THE ATTRACTIVE PIECE OF BUCYRUS TO US BECAUSE THEY MAKE LARGE HYDRAULIC SHOVELS, WE MAKE SMALL HYDRAULIC EXCAVATORS. WE MAKE TRUCKS THEY HAVE A VERY SMALL PIECE OF TRUCKS THEY GOT FROM TEREX.
KERNEN: HAVE YOU HIRED ANYONE RECENTLY DOMESTICALLY IN THE U.S.?
OBERHELMAN: OH, YES. WE'VE HIRED ALMOST ALL OF OUR PEOPLE THAT WE HAD TO DOWNSIZE, I WOULD SAY THROUGH THE RESCISSION. THEY ARE ALL BACK IN OUR FACTORIES TODAY. WE'VE ANNOUNCED A COUPLE OF NEW FACTORIES IN THE U.S. AND WE'VE BROUGHT A COUPLE OF ANNOUNCEMENTS INTO DECATUR, ILLINOIS. SO WE'VE HAD A SIZEABLE, OVER 5,000 PEOPLE WORLDWIDE, BACK IN OUR SHOPS AND THAT NUMBER WILL BE UP SIGNIFICANTLY ACROSS THE BOARD, INCLUDING THE U.S.
KERNEN: WHAT WOULD YOU LIKE THE OBAMA ADMINISTRATION AND CONGRESSMAN RYAN AND HIS FRIENDS TO WORK OUT?
OBERHELMAN: WELL, I THINK SHORT TERM WE'VE GOT TO GET PEOPLE BACK TO WORK. WE'VE GOT TO HAVE THE ECONOMY RIGHTED. AND WHATEVER THAT TAKES, THAT'S JOB ONE. LONG OF HAD TERM, WE HAVE TO ADDRESS THIS FISCAL DEFICIT SITUATION AND THE STABILITY OF THE COUNTRY AND I THINK THERE ARE TWO VERY DIFFERENT THINGS THAT HAVE TO BE DONE, BOTH VERY CHALLENGING, BOTH THAT WILL REQUIRE VERY KEEN LEADERSHIP. BOTH SIDES OF THE AISLE. WE'RE NOT GOING TO GET IT DONE WITH A LOT OF COOPERATION. NOT UNLIKE A BIG COMPANY. EVERYBODY'S GOTTA PULL ON THE ROPE AT THE SAME TIME AND IT'S A DIFFICULT PULL.
KERNEN: WE ALL HEAR ABOUT HOW WE HAVE NO MANUFACTURING. YOU'RE A BRIGHT SPOT AND A DOW COMPONENT IN OUR ECONOMY. ARE THEY TALKING TO YOU? DO YOU TALK TO THE OBAMA ADMINISTRATION AND DO THEY LISTEN?
OBERHELMAN: OH, YEAH, WE TALK TO THEM ALL THE TIME. AND WE HAVE GOOD CHANNELS IN. WE THINK THEY LISTEN. I THINK AS WE GO FORWARD WITH DEPTH OF THE HOLE THAT WE'RE IN TODAY, WITH UNEMPLOYMENT IS HIGH AS IT IS, WE'VE ALL GOT TO DO SOMETHING. I THINK WE'LL SEE THAT.
REP RYAN: DOUG YOU ARE CONFIDENT THE INDIAN DEAL IS GOING TO GO THROUGH?
OBERHELMAN: YES.
QUICK: DOUG, YOU SAID THAT THE JOBS ISSUE NEEDS TO BE THE FIRST THING THAT IS ADDRESSED. I DON'T THINK THERE IS ANYBODY QUIBBLING WITH THAT ON EITHER SIDE OF THE ISLE BUT THE QUESTION IS HOW TO BEST DO THAT. WHAT WOULD MAKE A COMPANY LIKE CATERPILLAR HIRE EVEN MORE PEOPLE?
OBERHELMAN: WELL, CERTAINLY SOME STABILITY OR CERTAINTY AROUND WHERE THE TAX RATES ARE GOING IN 45 DAYS. BOTH FOR INDIVIDUALS AND FOR CORPORATIONS. I SAW THE DEFICIT RECOMMENDATIONS AND THERE'S GOOD THINGS AND BAD THINGS BUT OVERALL SOME CERTAINLY AROUND THAT WOULD BE GREAT. I DON'T THINK THAT'S GOING TO BE DONE BY JANUARY 1. I THINK ABOUT THE WORST THING WE COULD SEE A SIZEABLE TAX INCREASE ON EVERYONE IN 45 DAYS TIME. THAT JUST SHOULDN'T HAPPEN. HAVING SAID THAT, WE'VE GOT TO DEAL WITH THE DEFICIT LONGER TERM AND GET SOME THINGS STRAIGHTENED OUT IN TERMS OF SPENDING LEVELS AND IT IS NO QUESTION IT IS A SPENDING LEVEL. YOU CAN'T HAVE 18% OF GDP IN REVENUE AND 25 OR 26%, WHICH IS SOME OF THE HIGHEST IN HISTORY, ON SPENDING. EVERYONE KNOWS THAT. IT'S GOING TO TAKE HEAVY LIFTING TO GET THAT DONE. WE KNOW HEAVY LIFTING AT CATERPILLAR FOR SURE AND IT IS NOT EASY, BUT THAT'S WHAT WE NEED FROM THE GOVERNMENT.
KERNEN: WE'RE GOING TO END IT THERE. APPRECIATE IT SO MUCH THAT YOU CAME ON THE SHOW THE MORNING OF THE DEAL AND GOOD LUCK. GOOD LUCK WITH THAT.
OBERHELMAN: THANK YOU. ALWAYS GOOD TO BE WITH YOU. WE'RE EXCITED. THIS IS A BIG DEAL FOR US AND IT WILL BE A GREAT ONE FROM 5, 10, 15, 20 YEARS FROM NOW. WE'RE VERY EXCITED ABOUT IT.
KERNEN: EXCELLENT. THANK YOU. APPRECIATE IT.
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