A federal court judge gave preliminary approval this month to a $20 million settlement agreement in a lawsuit over Komatsu’s acquisition of Milwaukee-based Joy Global.
The lawsuit, filed by in the U.S. District Court for Eastern Wisconsin in 2016, alleged the deal was “the product of a hopelessly flawed process” that was “designed to ensure the merger of Joy Global with Komatsu on terms preferential to Komatsu and defendants.”
Joy Global and a number of the company’s executives and board members were named in the lawsuit. Komastu acquired Joy in 2017 for $3.7 billion and securities filings show the purchase price increased by 66 percent during negotiations.
But the plaintiffs claimed the deal undervalued Joy Global and that while it was possible for other bidders to make a run at the deal, the initial agreement was structured to deter any offers.
For its part, Joy Global contended it received the highest possible price for the company and the deal was advisable given uncertainty in global mining markets.
In seeking to have the case dismissed, Joy Global called the case a “lawyer-driven suit.” The company said the initial plaintiffs owned a “miniscule” number of the company’s shares and had not used the resources available to them before the deal was complete.
Before the court could rule on Joy Global’s motion to dismiss the case, the two sides reached a settlement agreement in March of this year.
The class action settlement covers those who owned Joy Global stock between Sept. 1, 2016 and April 5, 2017. Joy Global had around 97.5 million shares outstanding during that period and the payout will be proportionate based on shares owned and how many claims are filed.
If 100 percent of the shares eligible to make a claim are included, the payout could be as low as 20 cents per share before taxes.
In a Sept. 14 order, Judge Pamela Pepper set a Dec. 20 hearing for final approval of the agreement.