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.
Under the terms of the agreement, Joy Global stockholders will receive $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 the firm’s common stock for the 60 trading days prior to July 21, 2016.
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 have 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, the world’s second-biggest mining and construction equipment maker, said the deal was consistent with its growth strategy for the mining division. 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.
Currently, Komatsu only makes surface-mining equipment, while Joy is the largest independent manufacturer of machines used underground.
The deal is expected to close next year.
Full news release is embedded below.
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