I want to keep the overlapping portion of the caterpillar and the half circles. Shape builder is not letting me do that. I have arranged, rearranged their position (bring front, etc). But they are not intersecting at all. I have checked all of them in outline mode, they all are drawn in usual shape. I do not understand. Please help.
if you just want to divide all the pieces so that you can change them separately, I would use the Divide Tool, instead of the shape builder tool. See attached photo.
If you use the shape tool and just single click in the middle of the overlapping area that you want to separate, it essentially cuts it.
Here I have some overlapping shapes which are currently solid rectangles:
Here I highlighted the overlapping part that I want to cut, with the shape building tool:
After single clicking with the Shape Builder tool, you can see how the shapes are now separated: