Japan’s Komatsu is buying Joy Global for $3.7 billion

Japanese manufacturer of mining equipment Komatsu (TYO: 6301) will buy US-based competitor Joy Global (NYSE:JOY) in a transaction valued at $3.7 billion, the latest takeover in a string of outbound M&A deals by Japanese companies encouraged by a strong yen.

Through its US subsidiary, Komatsu is acquiring all outstanding shares of Joy Global for $28.30 each — a 20% premium on Wednesday’s closing price — and assuming the Wisconsin-based firm’s debt.

The deal, Komatsu’s biggest-ever acquisition, is set to boost its ability to compete with Western rivals, particularly Caterpillar (NYSE:CAT).

Joy Global’s chief executive, Ted Doheny, said that while the deal was a “compelling transaction”, it didn’t mean conditions in the sector had improved.

“The mining industry continues to face cyclical headwinds from oversupplied commodities and reduced end user demand resulting in free cash flow restrictions for most producers,” he said in a statement. “We are also seeing structural changes in the US and China coal industry.”

Komatsu said the deal was consistent with its growth strategy for its mining division, especially as the Japanese firm’s main plant for that sort of equipment is based in Peoria, Illinois, which makes it an easy fit with Joy Global.

Joy is the largest independent underground-mining equipment maker and has long been viewed as a potential target for Komatsu, the second-biggest mining and construction equipment maker

More to come…

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