Komatsu Has No Plans to Buy Joy Global After Study, CEO Says
Komatsu Ltd. (6301), the world’s second- biggest maker of dump trucks, has no plans to bid for Joy Global Inc. (JOY) after studying the U.S. company as there are few synergies to aid its foray into underground mining equipment.
“While we often consider mergers and acquisitions, it wouldn’t be beneficial for us to do so without synergies,” Chief Executive Officer Kunio Noji said in an interview in Tokyo, where the company is based. Komatsu aims to offer “innovative” products to beat competition in a new business, he said.
Joy Global became the target of takeover speculation after Caterpillar Inc. (CAT)’s $8.8 billion acquisition of mining-equipment maker Bucyrus International Inc. last year. The Milwaukee-based company may attract suitors such as Komatsu that are willing to bet on a rebound in commodity prices, BB&T Capital Markets said last month.
Komatsu hasn’t held any talks with the company, Noji said. The Japanese maker of construction and mining equipment has yet to identify a target that offers value-added products and technology and will probably seek to enter the business through in-house development, he said.
“A latecomer wouldn’t be able to win a competition just by imitating others,” Noji said in the July 5 interview.
Present methods of underground mining don’t ensure the safety of workers and Komatsu will need to develop automated machinery to avoid accidents, such as the one in 2010 when 33 Chilean workers were trapped underground for more than two months, Noji said.
Joy Global shares plunged 3.2 percent in New York trading yesterday. Komatsu fell 3.5 percent to 1,818 yen in Tokyo. The stock has gained 1.1 percent this year, lagging behind a 4.8 percent gain in the key Nikkei index.
Komatsu, whose dump trucks and excavators are used in open pit mining, needs to add underground mining equipment because reserves in open-pit copper mines will become more scarce in the next 10 to 20 years, Noji said in November. Sweden’s Atlas Copco AB (ATCOA) and closely held heavy-machinery maker Liebherr-International Deutschland GmbH of Germany also produce underground mining equipment.
In China, the world’s biggest market for construction equipment, there have been few signs of a recovery in demand after the government’s monetary tightening measures cooled the market, Noji said.
Komatsu sales of excavators in China fell more than half in the three months ended June 30 from a year earlier, he said. Domestic and overseas suppliers of mining equipment may have accumulated inventories of more than six months, increasing concern about a rebound in demand, he said.
“Chinese demand may decline in the year ending March 31, although it was expected to remain flat under our business plan,” he said.
In Japan, efforts to rebuild the nation’s northeastern region after last year’s earthquake and tsunami are driving demand for construction equipment. The pace of growth in Indonesia slowed after a decline in coal prices in the past month, he said.