A confluence of factors are converging to fuel growing speculation on Wall Street that Milwaukee-based Joy Global Inc. is becoming an inviting acquisition target.
The speculation began with acquisition of rival mining equipment manufacturer Bucyrus International Inc. by Caterpillar Inc. for $8.6 billion two years ago. Many analysts have predicted that Joy Global also would need to be acquired by a larger suitor to enable it to compete on scale in the industry with Caterpillar’s massive Global Mining division, which is now based in Oak Creek.
The companies that could be poised to ponder acquiring Joy Global, according to analysts, include General Electric Co., Komatsu, AB Volvo and Berkshire Hathaway.
In a September report, William Blair analyst Larry De Maria said the possibility of GE buying Joy Global in the medium term is “increasingly likely.”
GE announced the creation of a new division, called GE Mining and based in Brisbane, Australia, in September.
“It is a good time to be looking at acquisitions in a value sense,” GE Mining chief executive officer Geoff Knox recently told Bloomberg News. “We have to be targeted in buying into spaces that leverage what we already do. We want to use our current knowledge and add it to the product line we’re acquiring and make it smarter and more appealing.”
The speculation prompted Joy Global’s stock to rise from $48.77 per share on Aug. 2 to $62.14 on Sept. 19. Still, the company’s stock is well off its 52-week high of $96.00, making it even more attractive as an acquisition target for a larger corporation that believes a rebound in commodity prices, especially in China, may be inevitable.
Another sign that a deal could be in the works could be the direction of insider trading. Joy Global officers James Agnew, Randal Baker, Eric Nielsen, Edward Doheny, Sean Major, Michael Sutherlin, Michael Olsen and Dennis Winkleman each acquired more Joy Global stock shares in September, as did directors John Gremp, Gale Klappa, Paul Siegert, Richard Loynd, James Tate, Steven Gerard and John Hanson. The insiders obviously believe the company’s stock has a huge upside.
GE chief executive officer Jeffrey Immelt did little to dampen speculation when he recently gave an upbeat outlook for his company’s industrial portfolio, including its mining business.
“We like the industrial portfolio and think it’s going to deliver double-digit growth,” Immelt said at a meeting with analysts and investors in Ossining, N.Y., near the end of September.
GE will have $100 billion in cash available for 2012 to 2016 from sources including internal payouts from its financial unit and cash flow from its industrial businesses, the company said. The biggest use of that extra cash will go for mergers and acquisitions and stock buybacks, with a goal of reducing the shares outstanding to less than 10 billion, GE said.
“It looks to me to be much cheaper and much more intelligent for GE to consider buying rather than building when it comes to this,” Michael Holland, chairman of New York-based Holland & Co., which oversees more than $4 billion, including GE shares, told Bloomberg. “Joy looks to me to be a great representative of the group and kind of a leader. It’s big enough that it would have an impact.”
Joy Global’s corporate headquarters are located at 100 East Wisconsin Avenue in downtown Milwaukee. The company operates its PH Mining business in Milwaukee at 440 W. National Ave. and Joy Mining Machinery in Warrendale, Pa.
