Joy Global buying LeTourneau Tech in $1.1 billion deal
By MIKE ELSWICK firstname.lastname@example.org
May 16, 2011 at 10 p.m.
Milwaukee-based Joy Global on Monday announced it plans to acquire Longview-based LeTourneau Technologies for $1.1 billion in cash.
Joy officials said they hope to close on the purchase of 100 percent of Rowan Cos. manufacturing division within 60 days. Rowan is based in Houston and has owned LeTourneau since 1994.
LeTourneau Technologies has about 1,100-Longview employees, a local payroll topping $30 million and is a heavy equipment maker for products used in the mining, oil and gas and forestry industries. The company has about 2,700 employees in total with about 500 based in Houston and another 450 at LeTourneau's Vicksburg, Miss., plant, company officials said Monday.
Joy, which posted $3.5 billion in revenue last fiscal year, said it looks to LeTourneau's offshore and land oil rigs for growth. Joy Global's P&H Mining subsidiary is already a dealer for LeTourneau in some regions and operates a facility in Kilgore.
A P&H Mining spokesperson said the firm's Kilgore facility includes sales, service, a parts warehouse and a machine shop that services Sabine Mining and other regional mining and heavy equipment operations.
Matt Ralls, Rowan's president and CEO, said the deal finalizes plans to divest itself of LeTourneau, first announced about three years ago. Those plans stalled during the recession.
He said the sale will provide Rowan with an estimated $875 million it expects to clear after taxes to use in its offshore drilling business.
"We also expect this transaction to create additional opportunities for LeTourneau and its employees, who will become part of an organization that is focused on manufacturing and will continue to encourage further innovations in both the mining equipment and drilling systems businesses," Ralls said.
"I want to personally thank the LeTourneau management team for the many organizational and operational improvements they have made in the company and their invaluable assistance in reaching an agreement with Joy," Ralls said. "I likewise want to thank all of the LeTourneau employees for their dedication and service over the years as part of the Rowan family."
LeTourneau Technologies Inc. reported $815 million in revenue in 2010, with $556 million from its drilling products business and $259 million in mining revenue. Joy Global officials said the company will add to its profit this year excluding transaction costs and an accounting charge.
LeTourneau operates a mining products business that manufactures large-wheel loaders for surface mining, providing the industry's largest model sizes and payload capacities.
LeTourneau also has a drilling products business that designs offshore jack-up drilling rigs and manufactures the primary components for these rigs. It is also a major manufacturer of drilling equipment for large land and offshore rigs and of specialty steel products.
LeTourneau will become part of Joy Global's P&H Mining Equipment business.
"LeTourneau gives us a great entry point into this sector," Mike Sutherlin, Joy Global's chief executive said in a statement on Monday. "Oil and gas has been defined as a strategic growth opportunity for a number of years."
LeTourneau, founded by R.G. LeTourneau, has been a leader in the earth-moving equipment industry since the 1920s. The company has had a Longview presence since the mid-1940s.
"This acquisition represents a compelling opportunity for Joy Global Inc. and our shareholders, with strong growth prospects for both the mining products and drilling products business segments," said President and Chief Executive Officer Mike Sutherlin.
"The LeTourneau mining products business is a natural fit with our P&H business," he said. "It adds another solution for surface loading that complements our electric mining shovels, and gives us access to smaller and non-electrified mines."
Sutherlin said the acquisition of the drilling products business moves Joy Global into another area of resource extraction that has similar fundamentals and value drivers as surface and underground mining. That makes it a good fit for Joy's business model which focuses on equipment reliability.
"Oil and gas has been defined as a strategic growth opportunity for a number of years, and LeTourneau gives us a great entry point into this sector," Sutherlin said. "We welcome the LeTourneau team to Joy Global and look forward to working together to pursue the growth opportunities that come with the combined business."
Randy Baker, president and chief operating officer of P&H Mining Equipment, said the addition of LeTourneau's front-end loaders will enhance P&H's product offering and leverage its 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," Baker said. "In addition, LeTourneau's electric-drive technology is more efficient than mechanical-drive systems, which has resulted in strong order growth."
Baker said adding LeTourneau gives P&H the opportunity to add a complementary product range that brings volume and scope to its after market business.
"We intend to use this acquisition to more efficiently provide our customers with better service levels," Baker said. "As a result, we will look for ways to integrate the LeTourneau and P&H field facilities and distribution activities."
Joy Global company officials were not available Monday to comment on what impact the acquisition would have on employment or production at LeTourneau Technologies.