Randy Baker, President and COO of P&H Mining Equipment said, "The addition of LeTourneau's front-end loaders will enhance our product offering and leverage our existing manufacturing and product distribution networks. We expect a smooth integration since P&H already serves as a dealer for LeTourneau in key geographies around the world. In addition, LeTourneau's electric drive technology is more efficient than mechanical drive systems, which has resulted in strong order growth. We believe that the LeTourneau business gives us the opportunity to further build on our Life Cycle Management strategy by adding a complementary product range that brings volume and scope to our aftermarket business. We intend to use this acquisition to more efficiently provide our customers with better service levels. As a result, we will look for ways to integrate the LeTourneau and P&H field facilities and distribution activities."
LeTourneau's drilling products business is expected to benefit from the renewal of a new rig build cycle for both offshore and land rigs. This demand is driven by the increased requirement for new, high-specification rigs and the emerging need to replace the majority of the jack-up fleet that is approaching its design life. This industry trend is well supported by 22 new jack-up rig orders thus far in 2011, with options for 28 more. With a full suite of drilling equipment and well recognized brands, LeTourneau is ideally positioned to benefit from this improvement in the land and offshore drilling markets. LeTourneau's revenues have been restricted because its addressable customer base largely competes with Rowan for drilling contracts, and therefore the change of ownership will significantly expand LeTourneau's market acceptance.
LeTourneau's calendar 2010 financial results had revenues of $815 million and Adjusted EBITDA of $105 million. Although this acquisition is primarily focused on growth and operating leverage opportunities, Joy Global Inc. estimates $40 million in synergies, achievable by 2013, as a result of manufacturing and supply chain efficiencies across both segments and the integration of aftermarket infrastructure in mining. The company also expects that the LeTourneau drilling products business will realize higher incremental margins as volumes improve from 2010.
Joy Global Inc. expects that the acquisition will be earnings accretive in fiscal 2011, excluding deal costs and excess first year purchase accounting charges. The company will finance the transaction with a combination of cash and additional borrowings.
Bank of America Merrill Lynch is serving as financial advisor to Joy Global Inc. on this transaction.
Covington & Burling LLP are serving as legal advisors.
Joy Global management hosted a conference call on May 16, 2011, to discuss the acquisition. A rebroadcast of the call will be available until the close of business on June 6, 2011 by dialing 888-203-1112 or 719-457-0820, access code #5531966.
Alternatively, a replay of the webcast will be available until the close of business on June 10, 2011.
Management posted a presentation on its website that provides additional information on this transaction. The presentation can be accessed at http://investors.joyglobal.com/events.cfm.
Joy Global Inc. is a worldwide manufacturer of equipment for surface mining through P&H Mining Equipment and underground mining through Joy Mining Machinery.