Japan's Komatsu has agreed to buy U.S. mining equipment manufacturer Joy Global for about $2.9 billion, its biggest-ever acquisition, in a bid to strengthen its core mining equipment business.
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The Japanese maker of construction and mining equipment said on Thursday that it would buy 100 percent of the Milwaukee, Wisconsin-based company for $28.30 per share, about a 20 premium to Wednesday's closing price.
Joy Global, which generates annual revenue of around $3.2 billion, manufactures equipment for both underground and surface mining, while Komatsu makes equipment for surface mining only. The deal is expected to close in mid-2017.
Komatsu said that although demand for mining equipment has fallen sharply from its peak as commodity prices dropped, it expects the sector to grow in the long term.
"Economic rationale will call for use of larger equipment in surface mining as well as further development of underground mining," Komatsu said.
Mining equipment makers have been hard-hit by the slump in commodities and their fortunes are only starting to reverse. While Joy Global shares are up this 86 percent this year, they are still at around half their levels at the beginning of 2015.
Komatsu plans to finance the acquisition with funds on hand and bank loans. The deal is subject to approval of Joy Global shareholders and the necessary regulatory green light.
Komatsu shares in Tokyo, already closed when the release was issued, ended up 2.3 percent at just under 2,082 yen on Thursday, valuing the group at around 1.97 trillion yen ($18.4 billion).
(Reporting by Chris Gallagher; Additional reporting by Aaron Sheldrick in TOKYO; Editing by Ryan Woo)