Komatsu approved for $2.9bn Joy Global acquisition

Japanese construction equipment manufacturer Komatsu has received US regulatory and shareholder approval for its planned acquisition of US mining equipment specialist Joy Global

The Komatsu PC7000 present at Bauma 2016.
The Komatsu PC7000 present at Bauma 2016.

Japan’s Komatsu, the world’s second largest construction equipment manufacturer, has received US regulatory and shareholder approval for its acquisition of US mining equipment specialist Joy Global.

Komatsu’s antitrust clearance for its $2.9bn multijurisdictional purchase of mining manufacturer Joy Global was secured by legal specialists Philippi Prietocarrizosa Ferrero DU & Uría of the District of Colombia (Washington DC) on the 20th January.

As of January 24, Joy Global announced that it had also received consent from the holders of a majority of its 5.125% senior notes due 2021 and 6.625% senior notes due 2036, voting together as a single class, to the company’s proposed amendments to the indenture governing the notes.

The merger remains subject to certain regulatory approvals outside the United States and customary closing conditions, but is on track to be completed by mid-2017, though it may occur earlier depending on the progress of the remaining regulatory clearance procedures.

Upon completion of the merger, the company will become a direct wholly owned subsidiary of Komatsu America and an indirect wholly owned subsidiary of Komatsu. The company’s stockholders approved the merger agreement at a special meeting of stockholders held on October 19, 2016.

Komatsu signed the initial purchase documentation to acquire Joy Global back in July 2016, agreeing to pay for $28.30 a share, which corresponds to the deadline valuation of roughly $2.9bn.

That price represented 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 with a 17% rally to $27.65 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.

The deal is Komatsu’s largest-ever acquisition, and bolsters its ability to compete with Caterpillar.

The purchase of Joy shrinks the list of independent mining equipment companies to a just few names, including Atlas Copco, Sandvik and Boart Longyear.

Even this is set to change as Atlas Copco has laid out plans to split the company and divide off its civil engineering, mining, rock excavation and construction tools business areas into a separate company.

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