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Queensland to host first full-scale production trial of driverless dozers in Australia Komatsu will acquire mining machinery manufacturer Joy Global for US$3.7 billion. The acquisition is the first major step for Komatsu into the underground mining space since its partnership with GE to develop underground mining technology , as despite the fact it has manufactured mining equipment since 1921 “the company’s portfolio does not include equipment for underground mining”. The acquisition also provides a new line of surface equipment. “Further, the Company’s product lineup does not include super large-sized loading equipment for surface mining,” Komatsu added. According to Komatsu, it bought Joy as part of its three-year growth strategy, part of which is focused on strengthening the company’s core mining equipment business. “Demand for mining equipment has declined dramatically from the peak, reflecting economic slowdown in emerging countries and low commodity prices,” Komatsu said. “Over the long term, however, the mining equipment business is projected to grow, driven by population growth and rapid urbanisation around the world. In terms of mining techniques, economic rationale will call for use of larger equipment in surface mining as well as further development of underground mining. “Joy Global and Komatsu’s product lines will integrate well, expanding options for customers worldwide, as Komatsu can now offer the underground mining equipment and super large-sized loading equipment of which Joy Global is a leading provider.” Aside from an entry into the underground mining space, the Joy Global acquisition also now provides Komatsu with a line of rope shovels and super large wheel loaders – which Komatsu says pairs well with its super large dump trucks – as well as draglines and drills. Caterpillar carried out a similar move in 2011, acquiring Bucyrus in order to gain exposure to underground mining and access the dragline market. Ted Dohney, Joy Global CEO, outlined his business’ rationalisation behind accepting the offer, stating the company “believes this is the right partnership to meet the evolving needs of our customers while furthering our ability to lead the mining industry with game-changing technologies and best-in-class products”. “Joy Global’s board of directors, in making its determination, considered the challenging market conditions the company believes are likely to persist,” he 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 US and China coal industry.” Joy stated it will operate as a separate subsidiary of Komatsu, and retain its brand. Komatsu added: “Merging manufacturing technologies and linking products through Komatsu’s fleet management system will further capabilities on both sides to directly engage with customers to optimise machine performance and enhance automation for safety and productivity gains.” The acquisition itself is structured as “a reverse triangular merger between Joy Global and a wholly owned subsidiary Komatsu has established for the purpose of the acquisition”. Joy Global will be the surviving company and the shareholders of Joy Global will receive a cash payment of US$28.30 per share, representing a 48 per cent premium. Goldman, Sachs & Co, is serving as the financial advisor, and Wachtell, Lipton, Rosen & Katz as legal counsel to Joy Global. Mitsubishi UFJ Morgan Stanley Securities Co. is serving as financial advisor to Komatsu, with Arnold & Porter LLP and Nagashima Ohno & Tsunematsu serving as legal counsel.