Milwaukee-based mining equipment manufacturer Joy Global Inc. announced this morning it has agreed to be acquired by Komatsu America Corp. for $3.7 billion.
[caption id="attachment_124046" align="alignright" width="410"]
Joy Global's Milwaukee production facility at 4400 W. National Ave.[/caption]
Komatsu America is a Rolling Meadows, Illinois-based subsidiary of Tokyo, Japan-based Komatsu Ltd. It makes wheel loaders, tracked excavators, dozers, crushers, motor graders and rigid dump trucks. Komatsu America has 15 U.S. locations. Komatsu Ltd. has 47,000 employees worldwide.
Joy Global makes advanced mining equipment, systems and direct services used in underground and surface mining. It has 12,000 employees worldwide, approximately 900 of whom are based locally.
The acquisition, which includes Joy Global’s debt, is expected to pay out $28.30 per share in cash to shareholders, which is a 48 percent premium to the volume weighted average closing price of Joy Global’s common stock for the 90 trading days ending July 21.
The deal is expected to close by mid-2017, pending shareholder and regulatory approval. Komatsu intends to operate Joy Global as a subsidiary and retain its brand names. The Milwaukee headquarters will continue to operate, said Caley Clinton, advertising and PR manager at Joy Global.
"Komatsu has made it very clear that they're committed to our long-term growth and plan to continue operating the company headquarters in Milwaukee,” Clinton said. "They’ve said that they hold our products, service and people in high regard and are really interested in growing the business. We have highly complementary product lines and we also really pride ourselves on direct service, so the companies actually align really well.”
According to an announcement from the companies, they will “align the organization and operation for optimal customer support from Joy Global’s headquarters in Milwaukee.”
While Clinton said it is too early to tell what that alignment will entail, she said Joy Global employees will have expanded opportunity for growth at the larger company. There is no word yet on how Milwaukee employment and operations might be impacted by the merger.
"Overall, for all employees, we’re confident that this acquisition is going to offer the potential for growth and it will allow the employees to be part of a larger, even stronger business,” she said.
In a filing with the SEC this morning, Joy Global detailed some of the merger agreement, including the terms for potential termination of the sale. The companies may terminate the acquisition if it is not completed on or before July 21, 2017, if it is not approved by the government, or if it is not approved by shareholders. If the deal is terminated, Joy Global would have to pay Komatsu $75 million in certain circumstances, and Komatsu would have to pay Joy Global $150 million in certain situations.
More details about the bidding process and the details of the transaction will be released in the company's proxy statement in the next couple of weeks, Clinton said.
Through the integration of the companies, Komatsu plans to advance mining innovation and efficiency.
Ted Doheny, president and chief executive officer of Joy Global, said he expects the transaction to deliver compelling value to shareholders and customers, while strengthening the companies’ ability to lead the industry and adapt to customer needs.
He said Joy’s board of directors decided to sell when considering difficult market conditions that have persisted for many quarters. BizTimes Milwaukee detailed Joy Global’s difficulties related to these conditions in a recent cover story
. The company posted a $1.2 billion loss last year, closed its Orchard Street plant, laid off the workers in its heavy fabrication and welding departments in September, and then closed those departments in May.
“Joy Global’s board of directors, in making its determination, considered the challenging market conditions the company believes are likely to persist,” Doheny said. “The mining industry continues to face cyclical headwinds from oversupplied commodities and reduced end user demand resulting in cash flow restrictions for most producers, creating an increasingly challenging environment. We are also seeing structural changes in the U.S. and China coal industry.
“Our companies share similar cultures and values and we expect many Joy Global employees to benefit from exciting career opportunities as part of an even larger, more diversified company. On behalf of the Joy Global board and management team, we thank our dedicated employees for their continued hard work and commitment to solving mining’s toughest challenges.”