Caterpillar settles accounting fraud issues at China’s ERA Mining Machinery
17 May 2013
Caterpillar Inc yesterday said that it has settled outstanding issues with ERA Mining Machinery Ltd (MML) on its acquisition of the Chinese mining equipment maker and its Siwei unit by reducing the purchase price.
''We are pleased to resolve these issues with the MML Parties, which, as we move forward, will position Caterpillar to put greater focus on improving the Siwei operation,'' said Steve Wunning, Caterpillar group president with responsibility for Resource Industries.
As part of the resolving the outstanding acquisition issues, Caterpillar's total outstanding payments to MML were reduced by $135 million to $29.5 million and have mutually agreed to release all their claims relating to the acquisition of MML..
In November 2011, Caterpillar, the world's biggest maker of earthmoving equipment, offered to buy China's manufacturer of underground coal-mining equipment MML, in a deal worth $885 million. (See: Caterpillar offers to buy China's ERA Mining Machinery for $885 million)
In mid-January, Caterpillar announced that its internal investigation has revealed a gross ''accounting misconduct'' at MML's wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing (Siwei).
The Illinois-based company disclosed that there was deliberate, multi-year, coordinated accounting misconduct designed to overstate the profitability of the company.
The discovery led the US machinery giant to write-down most of the value of its acquisition.
Hong Kong-based MML primarily designs, manufactures, sells and supports underground coal mining equipment in mainland China through Siwei.
Siwei possesses a manufacturing base of 600,000 square meters in Zhengzhou, Henan province, where it manufactures and sells roof support equipment to underground mining in China.
It is the third-largest maker of hydraulic roof supports for underground mines in China based on sales.
