Japan’s Komatsu to buy Joy Global for $3.7b

Japan’s Komatsu to buy Joy Global for $3.7b

Japanese manufacturer of mining equipment Komatsu will purchase American competitor Joy Global (NYSE:JOY) for US$3.7 billion, the latest acquisition in various M&A deals by Japanese companies encouraged by a strong yen.

Joy Global stockholders will receive $28.30 per share in cash for each outstanding share of common stock held.

This is Komatsu’s largest-ever acquisition and is set to boost its ability to compete with Western rivals, Caterpillar (NYSE:CAT) in particular.

Ted Doheny, Joy Global’s chief executive said that while the agreement was a “compelling transaction”, it didn’t mean the sector’s conditions 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,” added Doheny. “We are also seeing structural changes in the US and China coal industry.”

Komatsu is the world’s second-largest mining and construction equipment maker said the agreement was consistent with its growth strategy for the mining division.

Komatsu currently only manufactures surface-mining equipment, while Joy Global is the biggest independent maker of underground machines.

The deal is planned to close in 2017.