Joy Global Inc. announced yesterday (21 July) that its board of directors has unanimously approved a definitive merger agreement under which Komatsu America Corp., a subsidiary of Komatsu, will acquire Joy Global in a transaction valued at approximately US$3.7bn, including Joy Global’s outstanding debts.
Komatsu intends to operate Joy Global as a separate subsidiary of Komatsu and retain the strength of the Joy Global brand names. The companies will align the organization and operation for optimal customer support from Joy Global’s headquarters in Milwaukee, Wisconsin.
Komatsu and Joy Global’s products and services are highly complementary and the combined organization will continue to focus on safety, productivity and lifecycle cost improvement for customers. Komatsu plans to leverage both companies’ leading technologies to pursue product and service innovation to enhance mine safety and productivity. In addition, the companies employ complementary strategies and are committed to an integrated direct sales and service model.
“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,” said Ted Doheny, president and CEO of Joy Global. “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 USA and China coal industry.
“Our companies share similar cultures and values … and we expect many Joy Global employees to benefit from exciting career opportunities as part of an even larger, more diversified company. On behalf of the Joy Global board and management team, we thank our dedicated employees for their continued hard work and commitment to solving mining’s toughest challenges.”
Under the terms of the agreement, Joy Global stockholders will receive US$28.30 per share in cash for each outstanding share of common stock held, representing a 48% premium to the volume weighted average closing price of Joy Global’s common stock for the 90 trading days and 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, 2016.
The transaction is subject to customary closing conditions, including approval by Joy Global stockholders, the expiration or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act and regulatory approvals in certain other jurisdictions. The transaction is expected to close by mid-2017.
The transaction is not subject to any financing conditions. Komatsu had total assets of ¥2,614bn (US$25bn) and total equity of ¥1,517bn (US$14bn) as of March 31, 2016 with a credit rating of A from S&P and A2 from Moody’s.
July 22, 2016