Joy Global Inc. (JOY) has taken steps to acquire all outstanding shares of International Mining Machinery Holdings Limited (“IMM”) to become its sole owner. Joy Global will make a tender offer for the remaining 30.8% shares of IMM, which is required as per Rule 26.1 of the Hong Kong Takeovers Code.
Rule 26.1 of the Hong Kong Takeovers Code is applicable once the acquirer crosses the 30% voting right of the acquiree company. At the fag end of the previous year Joy Global completed the purchase of about 41.1% of the outstanding common stock of IMM, thereby taking its holding in IMM from 28.1% to 69.2% of the shares outstanding.
Joy Global through its subsidiary Joy Global Asia Limited is offering to purchase the remaining 30.8% outstanding shares of IMM common stock for HKD8.50 per share. The tender offer expires on February 3, 2012.
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.
Joy Global is working on increasing its stronghold in the Chinese mining equipment market. The IMM acquisition is a positive step in that direction. In December 2011, Joy Global received the much needed go-ahead from the Anti-monopoly Bureau of the Ministry of Commerce of the People’s Republic of China to acquire a 41.1% stake in IMM, thereby getting the majority holding.
The strategic move to acquire IMM will give Joy Global access to a major chunk of the Chinese market and enable it to cater to rising demands in the Asian subcontinent. We believe Joy Global’s ploy to gradually relocate production capacity to low-cost regions like China, Poland and South Africa will give it a cost advantage against its peers.
Joy Global’s competitor Caterpillar Inc.(CAT) is far from sitting idle. The latter has also strengthened its position in the emerging market through the Bucyrus acquisition. Bucyrus too will help Caterpillar in attaining a strong foothold in China and India, major mining markets both.
Joy Global currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. This is in sync with our long-term Neutral recommendation on the stock.
Mining equipment manufacturer and service provider Joy Global Inc. is based in Milwaukee, Wisconsin. The company caters to its global consumers and provides manufacturing, distributing and servicing equipment for surface mining, through its P&H Mining Equipment division, underground mining, through its Joy Mining Machinery division and bulk material conveyor systems, through its Continental Crushing & Conveying division.
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