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Major mining equipment player Joy Global Inc. (NASDAQ:JOYG) is selling the drilling products arm of the business it acquired from LeTourneau Technologies.
Joy Global said Wednesday it will sell LeTourneau’s drilling products business to Cameron International for $345 million. The all-cash deal has been approved by both companies’ boards of directors. Joy paid $1.1 billion in May to acquire LeTourneau from Rowan Companies, Inc.
“We closed on the LeTourneau acquisition in late June, and today announce the sale of the drilling products business to Cameron International,” said Joy Global President and CEO Mike Sutherlin. “Cameron’s leading presence in the oil and gas industry will allow Cameron to grow and develop LeTourneau’s drilling applications with greater speed and efficiency. In a short time, I have gained a strong appreciation for the people that make up the LeTourneau drilling products business, and it is good to know that they will have a great home and a bright future at Cameron.”
Sutherlin also said the proceeds from the sale will allow Joy Global to complete the acquisition of International Mining Machinery Holdings Ltd (IMM), which was announced in July. Joy paid $USD538 million in stock to acquire 41% of IMM, which manufactures underground longwall coal mining equipment in China.
“For Joy Global, the divestiture enables us to focus on our core mission of mining equipment and the proceeds will expand our funding options to complete the acquisition of International Mining Machinery Holdings Ltd (“IMM”). We indicated that LeTourneau would be immediately accretive to earnings, and its mining results for a six-week period added $0.04 to our third quarter earnings per diluted share.”
LeTourneau designs, builds and supports equipment for the mining and oil and gas drilling industries, and has been a leader in the earthmoving equipment industry since the 1920s.
LeTourneau’s drilling products business is a designer of offshore jack-up drilling rigs as well as a manufacturer of the primary components for these rigs. It is also a manufacturer of drilling equipment for large land and offshore rigs. The LeTourneau facilities in Houston, Texas and Vicksburg, Mississippi will be part of the transaction while the Longview, Texas facility will remain with Joy Global. Steel products are not included in this transaction and will be reported through the P&H surface mining equipment business. The parties will also enter into a Transition Manufacturing and Supply Agreement and Steel Supply Agreement, which will allow for the orderly transfer of Drilling Products work from the Longview facility to Cameron and the Steel Supply Agreement will allow Cameron time to develop other sources.
Drilling Products had 2010 revenue and Adjusted EBITDA of $515 million and $32.2 million, respectively.
Q2 Operating Results
Joy Global reported a $58 million increase in third-quarter operating profits from the same period last year, at $230 million versus $172 million. The company attributed the higher profits to higher sales volume, favorable price realization, customer contract cancellation fees and favorable manufacturing overhead absorption. Changes in foreign exchange rates compared to a year ago added $10 million to third-quarter operating profit.
Net sales increased 29 percent to $1.1 billion in the third quarter, excluding LeTourneau. Original equipment shipments increased 34 percent and aftermarket sales were up 25% over the prior year period. Changes in foreign exchange rates increased net sales by $43 million in the third quarter compared to a year ago.
Net sales of underground mining equipment rose 31 percent in the third quarter compared to a year ago, with a 33 percent increase in original equipment shipments and a 29 percent increase in aftermarket sales. The higher original equipment sales were from increased shipments of equipment in the United States, Eurasia, South Africa and Australia. Aftermarket sales increased in substantially all of the underground mining machinery markets.
Net sales of surface mining equipment were 24 percent higher in the third quarter than they were a year ago. Original equipment shipments increased 35 percent and aftermarket sales were up 19 percent. The increase in original equipment sales was due to higher sales in all markets except North America. The increase in aftermarket sales was led by South America.
“This has been a particularly good quarter for us,” Sutherlin said. “Our results continued the trend of strong operating performance, and we made two major strategic moves that will add long-term value. Very good operating leverage on strong sales growth enabled us to deliver another record for operating margin, before the impact of LeTourneau. ”
To read the full press release click here. Image by Joy Global Inc.
