Last week,
Joy Global Inc.
(
JOY
) completed the purchase of about 41.1% of the outstanding common
stock of International Mining Machinery Holdings Limited (IMM). Joy
Global's stake in IMM with the latest acquisition aggregates to
51.6% of the shares outstanding.
International Mining Machinery Holdings Limited is a leading
designer and manufacturer of underground longwall coal mining
equipment in China. It has strong domestic market positions in
roadheaders and longwall shearing machines.
The transaction was initially announced in July 2011 whereby Joy
Global entered into an agreement with TJCC Holdings Limited (TJCC)
to purchase 534.8 million shares of IMM for a price of HKD 8.50 per
share, representing 41.1% of the shares outstanding. In December
2011, Joy Global received nod from the Anti-monopoly Bureau of the
Ministry of Commerce of the People's Republic of China to carry out
the transaction.
Previously in July 2011, Joy Global Inc. had purchased
approximately 136.5 million shares of IMM in the open market at a
price of HKD 8.00 per share.
Per Rule 26.1 of the Hong Kong Takeovers Code, Joy Global will
now have to make an offer for the remaining 59% of IMM shares.
Joy Global is positioned to relocate production capacity to
low-cost regions like China, Poland and South Africa. The coal
market in China is large and diverse and requires a
multi-dimensional strategy.
Additionally, leadership in the Chinese market requires strong
positions specific to each segment. IMM being an established market
leader in the Chinese market with its premier products will help
Joy Global in procuring leading positions in each of the major
segments of the market.
Caterpillar Inc.
(
CAT
), which competes with Joy Global, has also strengthened its
position in the emerging market through Bucyrus acquisition. The
Bucyrus acquisition will help Caterpillar in attaining a strong
foothold in China and India, both of which are major mining
markets. Furthermore, Caterpillar can leverage Bucyrus' successful
aftermarket parts business and support services for its
equipment.
Hence, we retain our Neutral recommendation on Joy Global. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the shares over the near
term.
Based in Milwaukee, Wisconsin, Joy Global Inc. is a mining
equipment manufacturer and service provider.
CATERPILLAR INC (
CAT
): Free Stock Analysis Report
JOY GLOBAL INC (
JOY
): Free Stock Analysis Report
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