By Bob Tita
The struggling mining equipment industry will soon be dominated by two large companies: Japan’s Komatsu Ltd. and its larger U.S. rival, Caterpillar Inc. /zigman2/quotes/203434128/composite CAT -1.85%
Tokyo-based Komatsu /zigman2/quotes/204002437/delayed JP:6301 +0.41% said on Thursday it would buy U.S. equipment manufacturer Joy Global Inc. for $2.9 billion in a bet that the mining-equipment market will grow again starting in 2019.
Tumbling prices for mined commodities, such as iron ore, copper and coal, have driven down demand for mining equipment, roughly a $50 billion-a-year global industry, according to analysts’ estimates. Equipment makers have downsized operations and cut costs, while mining companies have indicated that their capital spending on equipment and mine expansions will continue to decrease next year.
But Komatsu, which already makes supersize dump trucks used in mining, said the acquisition would yield innovations that customers will want to buy as the market recovers and allow it to sell more complete lines of equipment.
The deal, which would be the largest in Komatsu’s history, needs the approval of Joy’s shareholders and has to be reviewed by antitrust regulators. Komatsu said it expects it to be completed by the middle of next year.