Caterpillar Buys MWM : US$810 million for German natural gas, diesel engine/gen-set manufacturer
by mi ke osenga
In a year when Caterpillar Inc. has invested in just about every corner of the company from mining equipment to Chinese hydraulic pumps and motors, to compact construction equipment, the Peoria, Illinois, U.S.A.- based giant has now spent US$1.63 billion on big engines in a little over three months.
As has been well chronicled, Caterpillar’s Progress Rail group spent US$820 million to buy Electro-Motive Diesel (EMD), a deal that was announced in June and closed in August. On Oct. 22, Caterpillar plunked down almost the same amount of money, US$810 million, to acquire German engine/gen-set manufacturer MWM Holding GmbH. Cat bought MWM, in an all-cash deal, from the private equity investment company 3i, headquartered in London, England. The total transaction value is E580 million (US$810 million), Cat said, subject to the usual regulatory approvals.
Some industry speculation has this deal as a reaction to GE’s recent acquisition of Dresser Inc., which includes the Waukesha range of natural gas engines. Not so, Cat said, noting it made the offer to 3i this summer, after being a serious contender for MWM (then Deutz Power Systems) in 2007. The acquisition of MWM will significantly increase its options for “sustainable power generation solutions,” Caterpillar said. “MWM is recognized for its leading technology and product strength, particularly for its highly efficient range of engines, combined heat and power, and trigeneration solutions capable of operating on a wide range of gaseous fuels including natural gas, biogas, mine gas and industrial waste gas,” said Caterpillar CEO Doug Oberhelman.
“This is a natural complement to Caterpillar’s existing diesel and gas power generation business and demonstrates our commitment to continued investment in sustainable products and industries,” Oberhelman added. MWM will become part of Caterpillar’s Electric Power Division (EPD), which supplies natural gas and diesel generator sets and integrated power systems involved in the generation, control and supply of electricity. Cat said the integration of MWM will result in “important synergies leveraging the two companies’ existing product ranges, advanced engine technologies, research and development resources, manufacturing, distribution and customer support capabilities.”
“The gas engine industry is a great fit for Caterpillar’s energy and electric power systems business. Together with the two companies’ premium products, technology and global distribution network, our comprehensive offerings will deliver sustainable power system solutions for our global customers,” said Bill Rohner, Caterpillar vice president with responsibility for Electric Power.
The history of MWM is a long and winding one. In 1871 the car inventor Carl Benz set the basis for the company with his “mechanical workshop” in Mannheim, Germany. In 1922, the company split, creating Motoren- Werke Mannheim AG (MWM). In 1985, Klöckner-Humboldt-Deutz AG took over MWM. In 2005, Deutz AG spun it off into a division known as Deutz Power Systems, before selling it to 3i in 2007.
MWM, with 1100 employees and 11 subsidiary companies, operates in four major market sectors: natural gas engines for cogeneration; the “special gas sector” that includes biogases and flammable gases emitted during industrial or mining applications, or in the extraction of raw materials; a greenhouse market segment that involves supplying systems for heating and supplying energy for greenhouses as well as the simultaneous ertilization of the plants using the filtered waste gas; and its diesel engine group.
The MWM line includes three gas engine families, the TCG 2016, TCG 2020 and TCG 2032 that in various iterations includes 20 models of 50 and 60 Hz generator sets with outputs from 414 to 4390 kW as mechanical drives and 400 to 4300 kW as electrical drives.
The various engine families include V8, V12, V16 and V20 configurations. The diesel engine lines includes V12 and V16 TCD 2016 and 2020 engines, six models in all, in both 50 and 60 Hz versions. Engine outputs in the 50 Hz range run from 576 to 2343 kW and 648 to 2225 kW in 60 Hz applications. A more detailed look at MWM’s gas and diesel engines can be found at www.gsgnet.net/c/c.aspx/ DEU003. So with this move, and EMD, Caterpillar has made significant moves on the big iron end of its stationary and engine product ranges. A market where Cat already had a significant presence with its 3600, C147 and MaK engines families.
Oberhelman shed some light on the attraction of these heavier markets markets to Caterpillar. “We came out of Progress Rail (acquiring EMD) thinking there’s a whole industry here we really like. High horsepower, heavy equipment, customers that value brand premiums and a business model similar to Cat. This is what we do. High horsepower. Right down our alley.”