Milwaukee, Wisconsin – In a move that will make it the world’s second-largest mining equipment company, Japan’s Komatsu Ltd. plans to buy Milwaukee-based Joy Global for $3.7 billion in cash and the assumption of Joy’s debt.
As recently as 2012, Joy had a market value of more than $12 billion, but the prolonged worldwide downturn of coal mining has hit it very hard. For the past 24 months, it has been closing plants, slashing jobs, and doing whatever it can to conserve cash.
The purchase by Komatsu, a company with deeper pockets and a more-diverse business structure, should keep portions of Joy active until mining resumes, says Ted Doheny, president and CEO of Joy Global.
“Joy Global’s board of directors, in making its determination, considered the challenging market conditions the company believes are likely to persist. 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,” Doheny says. “We are also seeing structural changes in the U.S. and China coal industries.”
In a presentation about the merger to investors, Joy Global officials say they believe natural gas power generation will overtake coal-fired power generation this year. Natural gas supplies in North America are near record levels, and the fuel burns cleaner than coal, helping utilities meet environmental standards.
In the presentation, Joy Global executives say they believe that trend away from coal will continue worldwide, further pressuring large equipment sales.
Founded in 1884, Joy had 12,000 employees in 20 companies at the end of 2015. Komatsu, founded in 1921, has more than 47,000 employees worldwide. The merger is expected to close in mid-2017.
Source: Komatsu Ltd., Joy Global Inc.