Shareholders of Milwaukee-based Joy Global Inc. voted to approve the company’s acquisition by Japanese firm Komatsu Ltd., but balked at executive compensation deals that could pay executives as much as $22 million.
Joy held a special meeting Wednesday with 78 million of the 98 million outstanding shares represented. Nearly 98 percent of shares were cast in favor of the deal. But more than 60 percent voted against the compensation plan, although that vote was non-binding.
“We are pleased with the outcome of today’s vote and appreciate the support we have received from Joy Global stockholders for the Komatsu transaction,” said Ted Doheny, Joy Global president and chief executive officer. “Stockholder approval represents a key milestone on the path to completing the transaction, which will deliver compelling value to Joy Global stockholders and further our ability to lead the mining industry with product and service innovation to enhance mine safety and productivity. We are confident that combining with Komatsu is the best way to exceed the needs of our customers, and look forward to expanding our offerings upon closing.”
The two companies expect the deal to be completed by mid-2017, although it could be done in early 2017 depending on regulatory approvals. Joy Global will become a wholly owned subsidiary of Komatsu America and Joy shareholders will receive $28.30 per share. Federal regulators in the United States have already cleared the deal, granting it an early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Joy announced the acquisition by Komatsu in July, saying it provided the best opportunity to maximize shareholder value. The mining equipment industry has been challenged in recent years by decreased demand for coal and slower growth globally.
Komatsu initially offered Joy $17 per share in January and the two sides eventually settled on $28.30, even as Joy’s stock performance improved substantially over the first half of the year. The rising stock price reduced the premium for shareholders in the deal.
While analysts had speculated there may be other bidders for the company, none emerged. Several shareholder lawsuits were filed arguing the deal undervalues the company, but most of those have since been dismissed after the company made additional disclosures in its proxy statement.
Joy shareholders followed in the footsteps of Johnson Controls Inc. shareholders, who also voted against executive compensation plans earlier this year in that company’s merger with Tyco International. About 64 percent voted no in that case.
Joy Global has change of control agreements in place with executive officers if they are terminated within two years, three in the case of Doheny, of the merger taking place.
The agreement would pay Doheny roughly $22.2 million, James Sullivan, chief financial officer, about $7.6 million, Sean Major, executive vice president and general counsel, $5.1 million and Johannes Maritz, executive vice president for human resources, $4 million. Three additional unnamed executive officers would receive a total of $5.1 million combined.