November 21, 2017 / 6:51 AM / a year ago

UPDATE 1-Australia's Downer to sell freight rail arm to Caterpillar unit

(Adds background, rail business outlook)

Nov 21 (Reuters) - Australia's Downer EDI said on Tuesday it plans to sell its freight rail business to Caterpillar Inc's Progress Rail unit for A$109 million ($82.18 million) as the engineering contractor reduces its dependence on the mining sector.

Downer is expected to book a non-cash writedown of A$40 million in relation to the divestment, and about 360 people employed by the freight rail business would be transferred to Progress Rail as a part of the deal, it said in a statement.

The company said its rail division was on track to meet its underlying full-year earnings target despite divesting the freight business.

Downer's rail arm is also involved in building passenger trains, operations and maintenance.

Earlier this year, Downer had announced it would buy cleaner-caterer Spotless Group Holdings for A$1.27 billion, saying the move would help the company reduce its reliance on the mining sector.

Downer has been diversifying away from mining services by buying companies in parallel industries.

$1 = 1.3264 Australian dollars Reporting By Rushil Dutta in Bengaluru; Editing by Sherry Jacob-Phillips

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