Komatsu America Corp will take over the Joy Global businesses, with the deal expected to close in or after April 2017.
Joy Global shareholders will get $28.30 a share – a 41% premium to the volume weighted average closing price of Joy Global’s common stock for the 60 trading days prior to July 21.
Komatsu intends to operate Joy Global as a separate subsidiary and retain the Joy Global brand names. For now, at least, the Joy businesses will be run from the Joy Global headquarters in Milwaukee, Wisconsin.
Komatsu plans to leverage both companies’ technologies. It has a strong share of the mining haul truck, wheel loader and hydraulic excavator markets. Joy Global has a strong underground coal business and, through its surface division P&H has draglines, rope shovels, blasthole drills and some of the largest wheel loaders going around thanks to its acquisition of LeTourneau.
The Joy underground business was also moving into underground hard rock tools – an area Komatsu is very weak in. Bringing Joy’s Montabert division in adds hydraulic demolition and drilling equipment to an area Komatsu is already fairly strong in.
This deal will put Komatsu very much on a par with Caterpillar, which moved into underground coal with its purchase of Bucyrus in 2010. It already had a healthy underground hard rock business and also gained draglines, hydraulic excavators and rope shovels with its Bucyrus buy.
For many years Joy lived in the shadow of Big Yellow and made several attempts to grow its business.
However, when President Barack Obama’s administration started its war on coal things started to go sideways.
Joy tried to diversify but to no avail.
“This is a compelling transaction that delivers substantial and certain value to our stockholders as well as expanded options for our customers and employees going forward,” Joy Global president and CEO Ted Doheny said.
“We believe this is the right partnership to meet the evolving needs of our customers while furthering our ability to lead the mining industry with game changing technologies and best-in-class products.
“Joy Global’s board of directors, in making its determination, considered the challenging market conditions the company believes are likely to persist.
“The mining industry continues to face cyclical headwinds from oversupplied commodities and reduced end user demand resulting in cash flow restrictions for most producers, creating an increasingly challenging environment.
“We are also seeing structural changes in the US and China coal industry.”
According to a Komatsu statement, the acquisition is in line with its growth plan that calls for it to strengthen its core mining equipment business in an effort to achieve sustainable growth.
When this deal is done Caterpillar and Komatsu will be very much vying for the one and two spots in the mining equipment hierarchy with Hitachi and Liebherr following behind. Sadly, Joy would have probably rounded out the third spot.
