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PEORIA, Ill. (AP) — Heavy equipment maker Caterpillar Inc. says its Alabama-based railroad service unit will spend $820 million cash to acquire locomotive maker Electro-Motive Diesel.

Caterpillar says that its Progress Rail Services division, headquartered in Albertville, Ala., has agreed to buy EMD from private equity firms Berkshire Partners and Greenbriar Equity Group.

Caterpillar Vice Chairman Doug Oberhelman says this deal will help his Peoria, Ill.-based company increase its presence in the railroad industry, which has a bright future because it can efficiently move lots of freight.

In 2009, EMD generated $1.8 billion revenue on sales of diesel-electric locomotives.

The deal is expected to close by year-end. EMD will keep its CEO and remain in LaGrange, Ill.

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