How Much Will Komatsu Pay Joy Global’s Shareholders?

Komatsu, Japan’s leading construction equipment maker, will pay $28.30 per share in cash (~$2.9 billion) to acquire Milwaukee-based Joy Global (JOY). The deal is worth approximately $3.7 billion, including JOY’s debt. The acquisition price is at a 20% premium to JOY’s stock price of $23.55 per share on August 17, 2016, and at a ~50% premium to JOY’s three-month average price.

At $3.7 billion, Komatsu will be paying ~1.7x JOY’s annualized six-month sales. Following the acquisition, Joy Global will become a wholly owned unit of Komatsu.

The deal is expected to close in mid-2017, according to Komatsu’s comments, and will be subject to the approval of Joy Global’s shareholders and regulations. But will Joy Global still be a listed entity, or will the company be delisted? (Check out Part 8 of this series for details.)

JOY is part of the Guggenheim S&P Mid-Cap 400 Pure Value ETF (RFV), accounting for 4.1% of the fund’s total holdings. Investors who believe JOY will benefit for Komatsu acquisition might consider investing in the ETF for indirect exposure. Notably, U.S. Steel (X), Talen Energy (TLN), and Allegheny Technologies (ATI) are among the top ten holdings of RFV, accounting for 4.0%, 2.9%, and 2.2% of the ETF.

In the next part, we’ll discuss Komatsu’s true weight in the construction and mining equipment space.