Joy Global to Sell LeTourneau Unit - Analyst Blog
September 01 2011 - 7:15AM
Zacks
Mining equipment maker Joy Global Inc. (JOYG)
said it has agreed to sell the drilling products business of the
recently acquired LeTourneau Technologies Inc. The company will
sell the LeTourneau Technologies Drillings Systems and Offshore
Products divisions to Cameron International
Corporation (CAM) for $375 million in cash.
The LeTourneau unit designs offshore jack-up drilling rigs and
manufactures primary components for the rigs, along with drilling
equipment for large land and offshore rigs. LeTourneau's products
include elevating systems, skidding systems, cranes, top drives,
rotary tables, draw works, mud pumps and rig control and power
systems.
The boards of Cameron and Joy Global have unanimously approved
the transaction. The companies expect to close the deal during the
fourth quarter of 2011, pending customary closing conditions.
Joy Global’s decision to sell the LeTourneau drilling products
unit stemmed from its intention to focus on its core business of
manufacturing surface and underground mining equipment. Also, the
company expects this sale to expand its funding options to complete
the planned acquisition of China-based International Mining
Machinery Holdings Ltd.
As part of the deal, with Cameron, Joy Global will dispose the
LeTourneau facilities in Houston and Vicksburg, Mississippi.
However, it will retain a facility in Longview, Texas, where
LeTourneau manufactures large capacity wheel loaders for the
surface mining market. Joy Global had acquired LeTourneau
International from Rowan Companies Inc. (RDC) for
$1.1 billion in June 2011.
Based in Houston, Cameron provides flow equipment products,
systems and services to worldwide oil, gas and process industries.
The company expects the addition of LeTourneau’s portfolio of
drilling equipment and rig components to enhance its products
offering as well as provide opportunities to expand its drilling
systems platform. Cameron expects this acquisition to be accretive
to its 2012 earnings.
Based in Milwaukee, Wisconsin, Joy Global Inc. caters to
consumers all around the world 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.
Joy Global has lifted its earnings forecast for fiscal 2011 by
40 cents to a range of $5.70 to $6.00. The Zacks Consensus Estimate
of $5.75 per share for fiscal 2011 also lies well within the
company’s guidance range.
We retain our Outperform recommendation on Joy Global. The
quantitative Zacks #2 Rank (short-term Buy rating) for the company
indicates upward pressure on the shares over the near term.
CAMERON INTL (CAM): Free Stock Analysis Report
JOY GLOBAL INC (JOYG): Free Stock Analysis Report
ROWAN COS INC (RDC): Free Stock Analysis Report
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