Komatsu to buy U.S. mining equipment rival Joy Global for $2.9 billion
Wednesday, July 27, 2016
Japanese mining equipment maker Komatsu Ltd has agreed to buy U.S. rival Joy Global Inc for $2.9 billion, its biggest-ever acquisition, to boost its clout in the mining industry.
The deal, worth $3.7 billion when Joy's debt is included, will roughly double the size of Komatsu's manufacturing equipment business and give it access to Joy's underground mining business. Joy has suffered from its significant exposure to North America's coal market, which faces regulatory pressure and competition from cheap natural gas.
Komatsu said on Thursday that it would acquire 100 percent of the Milwaukee-based company for $28.30 per share, about a 20 premium to Wednesday's closing price and an almost 50 percent premium to where the stock has traded in the last three months.
A number of Japanese companies have been taking advantage of a stronger yen to pursue overseas deals. The dollar has fallen 10 percent against the yen this year. Sterling has also slipped. Earlier this week, tech investor SoftBank bought U.K. chip designer ARM in Japan's largest-ever outbound M&A deal.
For Komatsu, acquiring the smaller Joy will help the Japanese equipment maker expand into hard-rock mining for metals such as copper. Komatsu currently produces only surface-mining equipment. Joy also manufactures larger dump trucks - key to cost savings in surface mining.
The deal follows a flurry of consolidation in the sector over the past few years. Demand for mining equipment has tumbled sharply from the commodity cycle's peak five years ago as China and other key markets slowed.
Komatsu generates annual revenue of more than $17 billion, with just under a quarter of it from mining-equipment sales.
The deal is subject to approval of Joy shareholders and regulatory scrutiny.
Komatsu, which has forecast a fourth straight annual drop in demand for key products this year, said it expects the sector to grow in the long term.