Joy Global announced on July 21 that its board of directors unanimously approved a deﬁnitive merger agreement by which Japanese equipment giant Komatsu will acquire Joy Global in a transaction valued at about $3.7 billion, including assimilation of Joy Global’s $845 million of outstanding debt.
Komatsu said it intends to operate Joy Global as a separate subsidiary of Komatsu and retain Joy Global’s brand names, which in addition to Joy include P&H (surface mining equipment), Montabert (rock drills) and Continental (conveyor systems). Over the past 10 years, Joy Global also acquired and integrated equipment lines from Mining Technologies International (underground mining), LeTourneau Technologies (large wheel loaders), Stamler (feeder-breakers, underground battery-powered haulers) and Goodman-Hewitt (conveyors). Joy Global also owns several Chinese brands in the longwall equipment sector, including Huainan, Jiamusi, Jixi, Qingdao Tianxun and Wuxi Shengda. Given the company’s involvement in the Chinese market, some observers believe a competing offer, possibly from a Chinese investor, could surface before the transaction closes.
Joy Global was the entity that emerged from the bankruptcy of the former Harnischfeger Industries in 1999. Under terms of the Komatsu transaction, Joy Global will maintain its headquarters in Milwaukee, Wisconsin. Komatsu said it plans to leverage both companies’ leading technologies to pursue product and service innovation to enhance mine safety and productivity. In addition, Komatsu said the companies employ complementary products and strategies and are committed to an integrated direct sales and service model.
Tim Sullivan, who was CEO of former equipment builder Bucyrus International — also based in Milwaukee — commented to the Duluth News Tribune that he thought, “Once the Caterpillar [acquisition of Bucyrus] happened, it was almost inevitable that a Komatsu-Joy deal would happen.” Caterpillar acquired Bucyrus, which had a portfolio of equipment lines similar to Joy Global’s, in 2011 for $8.8 billion. Komatsu reportedly looked closely at acquiring Joy Global in 2012, but ultimately determined that the timing and the numbers weren’t right.
Komatsu generates annual revenue of more than $17 billion, with about 25% of it from mining equipment sales. The company plans to ﬁnance the acquisition with funds on hand and bank loans.
Under the terms of the agreement, Joy Global stockholders will receive $28.30 per share in cash for each outstanding share of common stock held, representing a 48% premium to Joy Global’s shareholders. The deal is expected to close by mid-2017, pending stockholder and regulatory approvals.