The deal creates a competitive landscape with two matching global peers, Stephen Volkmann, a New York-based analyst at Jefferies LLC, said Thursday by phone.

“This deal allows Komatsu to compete toe-to-toe everywhere with Caterpillar,” Volkmann said. “There’s just two major players and each one basically does everything.”

Joy is the largest independent maker of underground-mining equipment and has long been viewed as a potential target for Komatsu, which manufactures dump trucks and large excavators for companies such as Rio Tinto Group. Komatsu looked at Joy as recently as 2012 but rejected a deal after concluding there were few cost savings.

Conditions in the mining industry have deteriorated since then. Tumbling metal and coal prices spurred producers to cancel projects and rein in spending, reducing demand for everything from underground tunneling kit for copper mining to big shovels used to extract coal. Joy has posted a net loss in each of the last three quarters and its share price is down by more than half over the last five years.

The pullback contrasts with the mining-machinery industry’s boom during 2000-2010 on the back of surging commodity prices.

Back then, miners complained of shortages and long lead times to secure equipment. Companies such as Joy were able to raise prices, benefiting from both increased demand and higher margins.

Eoin Treacy's view

Low interest rates and the potential for additional monetary stimulus have boosted M&A activity right around the globe and with rebounding commodity prices the resources sector is ripe for similar activity. 

Komatsu’s takeover of Joy Global is opportunistic but gives it the potential to compete in sectors that were not previously open to it. Whether it is successful will depend largely on the continued relative strength of the commodity sector. 

The FTSE-350 Mining Index is perhaps the most representative of the global mining sector. It rallied to break a five-year progression of lower rally highs in February and surged higher following Brexit in June. A consolidation has been underway this month but a sustained move below 18 would be required to question medium-term recovery potential.

Komatsu rallied over the last couple of weeks to push back above the trend mean and a sustained move below it would be required to question medium-term scope for additional upside. 

Caterpillar has been consolidating in the region of the April peak for the last week but a sustained move below $70 would be required to question recovery potential.