Terex Corp. (TEX) intends to use the money from the sale of its mining business to Bucyrus International Inc. (BUCY) to acquire machinery and industrial companies in niche markets.

Terex said Monday the $1.3 billion sale was prompted by the company’s increasing inability to provide the working capital and ongoing investment to effectively compete in the mining equipment market.

Terex’s stock was recently trading up 4.3% at $20.04. Bucyrus was up 9.6% at $ 55.76 a share.

“Terex would need to continue to invest in this business quite substantially,” Terex Chief Executive and Chairman Ronald DeFeo said during a conference call with Wall Street analysts. “Bucyrus already has that investment in place.”

For Bucyrus, the acquisition will expand the company’s business lines in hydraulic mining excavators, electric drive mining trucks, track and rotary blasthole drills, and highwall mining equipment. The business generates about $1 billion a year in net sales for Connecticut-based Terex.

The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2010.

DeFeo said Terex would use the proceeds from the sale to retire debt and acquire machinery and industrial companies in markets where Terex can have more market impact. DeFeo said his goal is to double Terex’s annual sales by 2012.

“We’re going to refocus the company toward machinery and industrial niches,” DeFeo said. “We’re going to take this company to places it hasn’t been before.”

Terex, which was built through a series of acquisitions, sells cranes, aerial work platforms, construction equipment, and material crushing and screening equipment.

DeFeo has been looking to reshape the company after finding it difficult to compete against larger rivals, such as Caterpillar Inc. (CAT), with large product lines of equipment.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

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