Heavy-machinery producer Caterpillar has announced its intention to buy ERA Mining Machinery for as much as USD 887 million.

The purchase will fortify Caterpillar's recent acquisition of mining-equipment manufacturer Bucyrus International. Although Bucyrus and ERA both make roof supports, Bucyrus and other Western mining equipment companies have had difficulty penetrating China's coal-mining industry with their own brands and product lines.

“You have to be a local player,” said Lawrence De Maria, an analyst for brokerage firm William Blair & Co. “It makes sense for Caterpillar to do.”

Demand for coal in China has surged has rapid development drives expansion of coal fired power-generating plants. For the first five months of 2011, electricity production in China rose 12 percent from 2010.

For the six months ended June 30, ERA recorded sales of HKD 787.2 million (USD 101.3 million), up 86 percent from the year-earlier period. Net profits for the six-month period totaled HKD 20.9 million.

Caterpillar is the world's largest manufacturer of earth-moving and mining equipment. Caterpillar products receive distribution in Mongolia via Wagner Asia. ERA primarily produces hydraulic roof supports for underground mines and is the third-largest maker of roof supports in China based on sales. Citigroup advised Caterpillar and The Blackstone Group advised ERA.