May 17, 2013
Updated May 17, 2013 at 10:44 AM CDT
PEORIA, Ill. – Caterpillar officials say they have reached an agreement related to their acquisition of ERA and its subsidiary Siwei.
Caterpillar reached the agreement with two former directors of ERA and two other parties with an interest in the settlement, Mining Machinery Limited and James Thompson III.
Emory Williams, the former Chairman of ERA, said, "We wish Caterpillar continued success in the China mining sector. We are pleased to conclude this matter and to continue our track record of building successful businesses in China."
As part of the resolution of outstanding issues between the parties, Caterpillar's total outstanding obligations of $164.5 million to the MML Parties, which were part of Caterpillar's obligations relating to its acquisition of ERA, were reduced by $135 million to $29.5 million.
In addition, Caterpillar and the MML Parties have mutually released all their claims relating to the acquisition of ERA.
In November 2011, Caterpillar and ERA jointly announced a pre-conditional voluntary offer by Caterpillar, through a wholly-owned subsidiary, for all of the issued shares of ERA, which at that time was a publicly traded company on the Hong Kong Stock Exchange. ERA primarily designs, manufactures, sells and supports underground coal mining equipment in China through its wholly-owned subsidiary, Siwei. In June 2012, Caterpillar announced the completion of its tender offer for ERA.
On January 18, 2013, Caterpillar announced that an internal investigation had uncovered deliberate, multi-year, coordinated accounting misconduct at Siwei leading to a non-cash goodwill impairment charge. Caterpillar's investigation determined that certain Siwei senior managers, one of whom was an ERA director, had engaged in this misconduct and, as a result, Caterpillar removed those responsible. Caterpillar found no evidence that the other former ERA directors or James Thompson III engaged in the accounting misconduct. The settlement concludes the dispute resolution process invoked by Caterpillar.
In addition to entering into the settlement agreement, Caterpillar has agreed that a company affiliated with the MML Parties may purchase from Siwei certain receivables and other assets.