{"id":5175,"date":"2016-07-21T14:57:27","date_gmt":"2016-07-21T14:57:27","guid":{"rendered":"http:\/\/minutes.machine.market\/?p=5175"},"modified":"2016-07-21T14:57:27","modified_gmt":"2016-07-21T14:57:27","slug":"komatsu-signals-mining-optimism-in-2-9-billion-joy-takeover","status":"publish","type":"post","link":"https:\/\/machine.market\/blog\/komatsu-signals-mining-optimism-in-2-9-billion-joy-takeover\/","title":{"rendered":"Komatsu Signals Mining Optimism in $2.9 Billion Joy Takeover"},"content":{"rendered":"<ul class=\"article-abstract\">\n<li class=\"article-abstract__item\">\n<div class=\"article-abstract__item-text\">U.S.-based Joy makes machinery used in open pits, underground<\/div>\n<\/li>\n<li class=\"article-abstract__item\">\n<div class=\"article-abstract__item-text\">Deal is industry\u2019s largest since <a href=\"http:\/\/www.caterpillar.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Caterpillar <\/a>bought <a href=\"http:\/\/www.cat.com\/en_US\/products\/new\/by-industry\/mining.html\" target=\"_blank\" rel=\"noopener noreferrer\">Bucyrus<\/a><\/div>\n<\/li>\n<\/ul>\n<p><a href=\"http:\/\/www.komatsu.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Komatsu Ltd.<\/a>, the second-biggest mining and construction equipment maker, agreed to buy <a href=\"http:\/\/www.joyglobal.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Joy Global Inc.<\/a> for $2.89 billion, signaling the Japanese company is optimistic that demand for shovels and drills will rebound after years of declining commodity prices.<\/p>\n<p><a href=\"http:\/\/www.bloomberg.com\/news\/articles\/2016-07-21\/komatsu-agrees-to-buy-u-s-based-joy-global-for-2-89-billion\" target=\"_blank\" rel=\"noopener noreferrer\">Bloomburg<\/a> reports, Komatsu will pay $28.30 a share in cash,\u00a0it said Thursday in a statement, an offer 20 percent higher than\u00a0Milwaukee-based Joy\u2019s closing price the day before. It will be Komatsu\u2019s biggest-ever acquisition, bolstering its ability to compete with larger rival Caterpillar Inc. Joy shares jumped 18 percent to $27.84 at 9:46 a.m. in New York.<\/p>\n<p>Joy is the largest independent maker of underground-mining equipment and has long been viewed as a potential target for Komatsu, which manufactures dump trucks and large excavators for companies such as <a href=\"http:\/\/www.riotinto.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Rio Tinto Group<\/a>. Komatsu looked at Joy as recently as 2012 but rejected a deal after concluding there were few cost savings.<\/p>\n<p><img src=\"https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/iRs0zLna5ZNk\/v2\/488x-1.png\" srcset=\"https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/iRs0zLna5ZNk\/v2\/488x-1.png 488w, https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/iRs0zLna5ZNk\/v2\/628x-1.png 628w, https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/iRs0zLna5ZNk\/v2\/750x-1.png 750w, https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/iRs0zLna5ZNk\/v2\/-1x-1.png 1200w\" alt=\"\" data-attachment-key=\"300537946\" \/>Conditions in the mining iindustry have deteriorated since then. Tumbling metal and coal prices spurred producers to cancel projects and rein in spending, reducing demand for everything from underground tunneling kit for copper mining to big shovels used to extract coal. Joy has posted a net loss in each of the last three quarters and its share price is down by more than half over the last five years.<\/p>\n<h3>Underground Mines<\/h3>\n<p>The pullback contrasts with the mining-machinery industry\u2019s boom during 2000-2010 on the back of surging commodity prices. Back then, miners complained of shortages and long lead times to secure equipment. Companies such as Joy were able to raise prices, benefiting from both increased demand and higher margins.<\/p>\n<p>The height of that expansion was marked by the industry\u2019s largest deal &#8212; Caterpillar\u2019s $7.4 billion acquisition of\u00a0excavator maker Bucyrus International Inc., which was announced in 2010.<\/p>\n<p>Adding Joy\u2019s expertise in underground equipment is a logical step for Komatsu as new mines are increasingly likely to be developed deep below the surface, according to Sydney-based Fat Prophets resource analyst\u00a0David Lennox. \u201cThe easy deposits have all generally been found,\u201d he said.<\/p>\n<h3>\u2018Bright Future\u2019<\/h3>\n<p>The purchase of Joy also means the list of independent companies making mining equipment has shrunk to a just few companies, including Atlas Copco AB, Sandvik AB and Boart Longyear Ltd.<\/p>\n<p>Despite the dramatic decline in demand in recent years, the industry will eventually see growth again, Komatsu said Thursday, citing global population growth and urbanization. The \u201ccurrent business environment for the mining industry is tough but there\u2019s a bright future in the mid- and long-term,\u201d Chief Executive Officer Tetsuji Ohashi told reporters in Tokyo after the deal was announced.<\/p>\n<h3>Close to Revival?<\/h3>\n<p>Major deals in mining or mining services indicate\u00a0companies in the industry believe commodities are close to a revival, Lennox said. Commodities entered a bull market in June as supply constraints delivered gains in materials from zinc to soybeans, drawing a line under the biggest price collapse in a generation. After years of cutting loss-making output and trimming costs, the largest miners have begun to authorize investments in\u00a0new projects.<\/p>\n<p>The Joy deal is valued at about $3.6 billion once debt is included, according to data compiled by Bloomberg. The takeover is expected to close in mid-2017 after regulator and shareholder approvals, Komatsu said. Goldman Sachs Group Inc. advised Joy while Mitsubishi UFJ Morgan Stanley Securities Co. Ltd. advised Komatsu.<\/p>\n<p>Komatsu plans to operate Joy as a separate subsidiary and will retain its brand names, the U.S. company said in a separate statement.<\/p>\n<div class=\"author-byline\"><a class=\"author-link\" href=\"http:\/\/www.bloomberg.com\/authors\/AFy2BEDG-IA\/simon-casey\" rel=\"author\" data-tracker-category=\"nav\" data-tracker-label=\"author_link\" data-tracker-action=\"click\">Simon Casey<\/a><\/div>\n<div class=\"author-byline\"><a class=\"author-link\" href=\"http:\/\/www.bloomberg.com\/authors\/AB7ARWJOgNw\/masumi-suga\" rel=\"author\" data-tracker-category=\"nav\" data-tracker-label=\"author_link\" data-tracker-action=\"click\">Masumi Suga<\/a><\/div>\n<div class=\"author-byline\"><a class=\"author-link\" href=\"http:\/\/www.bloomberg.com\/authors\/ASIsQsgx0V8\/javier-blas\" rel=\"author\" data-tracker-category=\"nav\" data-tracker-label=\"author_link\" data-tracker-action=\"click\">Javier Blas<\/a><\/div>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>U.S.-based Joy makes machinery used in open pits, underground Deal is industry\u2019s largest since Caterpillar bought Bucyrus Komatsu Ltd., the second-biggest mining and construction equipment maker, agreed to buy Joy Global Inc. for $2.89 billion, signaling the Japanese company is optimistic that demand for shovels and drills will rebound after years of declining commodity prices. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":5176,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":""},"categories":[2,8,9],"tags":[266,790,825],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Komatsu Signals Mining Optimism in $2.9 Billion Joy Takeover - MachineMarket Blog<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/cranemarket.com\/blog\/komatsu-signals-mining-optimism-in-2-9-billion-joy-takeover\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Komatsu Signals Mining Optimism in $2.9 Billion Joy Takeover - MachineMarket Blog\" \/>\n<meta property=\"og:description\" content=\"U.S.-based Joy makes machinery used in open pits, underground Deal is industry\u2019s largest since Caterpillar bought Bucyrus Komatsu Ltd., the second-biggest mining and construction equipment maker, agreed to buy Joy Global Inc. for $2.89 billion, signaling the Japanese company is optimistic that demand for shovels and drills will rebound after years of declining commodity prices. 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