Komatsu Global announced on Friday that it has signed a definitive agreement with Joy Global, a specialist manufacturer of surface and underground mining equipment, under which Komatsu America Corp. (KAC), a wholly-owned subsidiary of Komatsu in the USA will acquire 100% ownership of Joy Global.
Komatsu will acquire Joy Global for U$28.3 per share (total of approximately US$2.9 billion). The company plans to finance the acquisition through funds on hand and bank loans and does not plan to increase capital at this stage.
The acquisition is expected to close in mid- 2017, subject to the approval of shareholders of Joy Global and the receipt of necessary regulatory approvals under laws in relevant countries.
Purpose of the acquisition
In April, Komatsu Global embarked on a mid-range management plan for the next three years (2016-2018) under the slogan “Together We Innovate GEMBA Worldwide – Growth Toward Our 100th Anniversary (2021) and Beyond”.
The acquisition is in line with the growth strategy of the plan which calls for Komatsu to strengthen the core mining equipment business in an effort to achieve sustainable growth.
Joy Global is a worldwide mining machinery and services company founded in 1884 and through its leading brands P&H, Joy and Montabert, it manufactures and services advanced original equipment and parts for underground and surface mining applications, as well as material handling systems and components for a variety of applications, products that complement existing Komatsu products.
Komatsu’s integrated technology, services and solutions are a critical component of operations in a variety of commodity markets including energy, hard rock and industrial minerals.
The company operates globally and generates an annual revenue of $3.172 million however, it currently has an annual revenue of 450 billion yen from mining equipment business which is generated by surface mining equipment only because its portfolio does not include equipment for underground mining.
Benefits of the acquisition
The acquisition of Joy Global, which shares similar cultures, values and strategies with Komatsu, is expected to bring Komatsu the following two benefits.
- Complementary product line-up
Joy Global’s line-up of surface mining equipment includes rope shovels, super large wheel loaders, draglines and drills which Komatsu does not offer.
The company’s line-up of rope shovels and super large wheel loaders pair well with the super large electric dump truck Komatsu manufactures and will generate synergies in sales and services.
In addition, Joy Global manufactures underground mining equipment, another area Komatsu has not engaged in. With the acquisition, Komatsu will become a meaningful participant in underground mining as well. The acquisition will also allow Komatsu to offer Dantotsu products to customers in both surface mining and underground mining businesses.
- Stronger Dantotsu solution offerings
Joy Global places priority on providing solutions that enhance safety and productivity of customer operations. For example, JoySmart Solutions leverages the internet of things to connect customer products with experts using data and analytics to improve mine performance.
Komatsu Global also engages in the improvement of safety and productivity with its Autonomous Haulage System, mine fleet management systems and KOMTRAX Plus, which all serve to visualize jobsite operations.
Data obtained from IoT-based mining equipment and systems will be connected and used through the open platform of Komatsu and this will bring synergies in providing Dantotsu solutions to customers.
Structure of the acquisition
This acquisition is structured as a reverse triangular merger between Joy Global and a wholly owned subsidiary KAC has established for the purpose of the acquisition (acquiring subsidiary).
Joy Global will be the surviving company and the shareholders of Joy Global will receive the cash payment.
At the same time, shares of the acquiring subsidiary owned by KAC will be converted into outstanding shares of the surviving company, making the surviving company the wholly-owned subsidiary of KAC.
Management policy after the acquisition
Joy Global will operate as a separate subsidiary of Komatsu where both companies will work together to align the organisation and operation to better support their customers while retaining the strengths of Joy Global, its brand and the “direct sales/services” scheme.
The corporate culture that values the pursuit of safety, improvement of customer productivity ($/ton reduction) and focus on customer-perspective are in harmony with the corporate culture of Komatsu.
Komatsu highly respects that the Joy Global operation is finely attuned to the mining industry and will seek to maximize the synergies from the Acquisition.