By JON HAAG
Hot on the heels of the July 1 shutdown of Joy’s Franklin plant, the Milwaukee-based Joy Global announced Thursday it has agreed to be acquired by Japanese manufacturing rival Komatsu in a deal said to be valued at about $3.7 billion.
The acquisition, which still requires approval from shareholders and regulatory approvals from relevant countries, is expected to close by mid-2017.
Joy Global representatives said the acquisition won’t change any of its day-to-day operations until the deal is sealed next year.
And it’s doubtful that the acquisition would have any ramifications locally, according to Franklin’s city manager Tracy Jamieson.
“As far as the City of Franklin is aware, this proposed acquisition of Joy Global wouldn’t have any effect on Joy Plant 1’s closure,” Jamieson said.
“They (Komatsu) have indicated intent to retain our brand name so all plans and projects continue as they were and we are just focused on business as usual,” said Caley Clinton, a public relations manager for Joy Global.
As part of the acquisition, Joy – valued at approximately $2.89 billion – will be bought with a cash transaction through Komatsu funds on hand and bank loans. The pricetag reflects the value of each Joy share at $28.30.
The acquisition brings Joy’s underground mining expertise to a company that has previously worked solely on surface mining.
Komatsu is several magnitudes larger than Joy, though, employing nearly 50,000 workers. It specializes in mining, construction, industrial and military equipment.
The Japanese conglomerate has been in operation since 1921, expanding in the 1990s by acquiring various manufacturing and distribution businesses from major mining regions.
“They look to expand on that with our fleets,” Clinton said. “Our product lines are highly complementary.”
Joy Global has faced economic adversity in recent years as strict new regulations on the mining industry and record-low demand for coal – driven by factors such as China passing peak consumption and abundant gas drilling in the United States – have taken their toll.
Joy had been the largest non-government employer in Venango County, with plants in both Franklin and Reno, until the Franklin Plant 1 shutdown dislocated approximately 150 workers earlier this month.
After years of trickling layoffs, Joy announced in March that operations at the Franklin plant would slow down until they ceased entirely by early July.
The announcement of a corporate takeover Thursday morning saw Joy stocks surge to $28.20, a nearly 20 percent increase and a massive difference from earlier this year when stocks closed as low as $8.57 after years of struggle in the industry. The shares are the highest they have been since July 2015, but still stand in stark contrast to Joy Global’s production just five years ago when shares were valued at $74.97.
Komatsu acknowledged in a press release that demand for mining equipment has slumped significantly, which the company blames on an economic slowdown and low commodity prices. Komatsu’s long-term outlook, however, relies on population growth and rapid urbanization around the world that would fuel the need for mining, which, in turn, would create the need for more larger equipment.
Komatsu said Joy’s surface mining equipment such as rope shovels, super large wheel loaders, draglines and drills will complement its super-large electric dump trucks.
Komatsu added that the company expects Joy to operate as a separate subsidiary and that it will work “to better support our customers while retaining the strengths of Joy Global.”
“Overall, we are confident in the potential for growth that would come as being part of a larger, even stronger business,” Clinton said. “Our two companies are highly complementary and our product lines fit together really well,” she said.