2nd UPDATE: Joy Global Buys 41% Of International Mining Machinery

Joy Global Inc. (JOYG) said it will acquire 41% of International Mining Machinery Holdings Ltd. (ICMHF, 1683.HK) for $585 million and plans to obtain the remaining shares of the Chinese mining equipment manufacturer through a tender offer.

TJCC Holdings Ltd., a unit of U.S. private equity firm the Jordan Co., has agreed to sell its 534.8 million shares to Joy Global for HKD8.50 per share, about 30% above International Mining's stock price when trading in Hong Kong was suspended earlier this week. The firm has a market capitalization of about HKD$8.5 billion ($1.1 billion).

The Jordan Co. founded International Mining in 2006 and has expanded the company through a series of acquisitions in recent years. The company went public in 2010, with TJCC maintaining a 41% stake in the company. Joy Global said it will issue a tender offer for the remaining 59% of the International Mining's shares following the completion of its share purchase from TJCC.

Joy Global did not immediately provide details about the tender offer. If Joy Global offers the remaining shareholders the same price for their stock as TJCC, Joy Global's cost for International Mining would rise to about $1.4 billion.

The purchase is subject to the approval China's Anti-Monopoly Bureau of the Ministry of Commerce. The Chinese government's reluctance in the past to approve the sale of Chinese machinery manufactures to foreign-based companies has been a hurdle for U.S. companies' interested in expanding in China.

"Our understanding is that Chinese authorities were not open to mining assets being owned by foreign companies -- raising the potential that Joy Global could end up being a long-term minority holder in this business," said Stephen Volkmann, an analyst for Jefferies & Co., in a note Thursday to investors.

The acquisition of International Mining would give Milwaukee-based Joy Global a significantly larger presence in China's coal-mining machinery market, which accounted for less than 10% of Joy Global's sales last year. International Mining is one of China's biggest manufacturers of long-wall mining shears for extracting coal from underground mines. The company also makes tunnelling machinery for excavating underground mines.

International Mining last year reported net income of CNY350 million, ($53.9 million) from sales of CNY1.94 billion.(about $300 million).

"A core part of our business strategy has been to position ourselves for the high growth of the emerging markets, and the investment in [International Mining] is a major step in the execution of that strategy," said Joy Global CEO Mike Sutherlin in a written statement. "The China coal market is large and diverse, and must be accessed with a multi-dimensional strategy."

Joy Global's purchase of International Mining would be Joy Global's second major acquisition in recent months. The company in May agreed to purchase LeTourneau Technologies Inc. from Rowan Cos. (RDC) for $1.1 billion. LeTourneau provides Joy Global with exposure to markets for oil-and gas-drilling equipment and will expand Joy's line of high-horsepower wheel loaders. LeTourneau specializes in giant electric-drive wheel loaders for surface mines.

Sutherlin has made no secret of plans to expand Joy Global's footprint in the mining machinery industry in response to Caterpillar Inc.'s (CAT) recent acquisition of Joy Global's primary competitor, Bucyrus International Inc.

"They're doing everything they can to avoid being scooped up by a larger player," said Adam Fleck, an analyst with research firm Morningstar Inc. "The strategic intent [of buying International Mining] is positive for Joy Global."

Joy Global's stock was recently trading up at 0.56% at $94.40 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

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