Joy Global's Board Unanimously Recommends Sale to Komatsu

We plan to raise our fair value estimate for no-moat

Long term, this transaction will make Joy Global-Komatsu a mining equipment firm with a complete product suite and better able to compete with Caterpillar's comprehensive mining equipment product line. We doubt this deal would be blocked by antitrust regulators. Komatsu's current mining business largely sells above-ground equipment, while Joy's business is a mix of above-ground and below-ground equipment. While there are some areas of overlap in above-ground mining shovels and wheel loaders, we believe targeted divestitures can allay any regulator concerns. Importantly, this transaction finally gives Joy Global access to a well-regarded mining truck business, which it has long lacked.

Although there have been rumors that Volvo or Sandvik could acquire Joy Global, we suspect both had an opportunity to bid on the company and passed. Sandvik's recent decision to sell a mining equipment business is likely evidence that the firm currently lacks interest in Joy Global and will not be a last-minute bidder. Although Volvo or another mining equipment maker such as Metso could become involved, we think Komatsu's superior global distribution network and high-profile mining truck business position it to best create synergies from a Joy Global tie-up.

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