Komatsu, the world’s second largest mining and construction equipment manufacturer, has signed the purchase documentation to acquire the $2.9bn US mining equipment specialist Joy Global for $28.30 a share.
In a statement, the Japanese manufacturer acknowledged the demand for mining equipment had “declined dramatically”, but that Joy Global would strengthen its offering of larger loading and underground equipment that would have higher ‘economic rationale’ under recovery conditions.
Komatsu CEO Tetsuji Ohashi, stated: “The mining market is near the bottom now. Now is the right time. We have solid enough financial soundness to withstand a large scale acquisition.”
The deal is Komatsu’s largest-ever acquisition, and bolsters its ability to compete with Caterpillar.
Stephen Volkmann, a New York-based analyst at Jefferies, told Bloomberg that the deal creates a competitive landscape with two matching global peers.
“This deal allows Komatsu to compete toe-to-toe everywhere with Caterpillar,” he said. “There’s just two major players and each one basically does everything.”
The purchase of Joy also means the list of independent companies making mining equipment has shrunk to a just few companies, including Atlas Copco, Sandvik and Boart Longyear.
The purchase price being paid by Komatsu represents a premium of roughly 20% on the value of shares in Joy Global immediately prior to the deal, and Joy shares responded to news of the deal by recovering by 17% to $27.65.
This contrasts with Joy Global’s prior loss of half of its share value since the beginning of last year, partly in response to a $1.18bn loss in the fiscal year ending October 2015.
Komatsu, whose shares fell by almost 20% over the same period, will close the deal during 2017.
