NEW YORK - The US mining equipment maker Joy Global Inc plans to buy an initial 41 percent stake in International Mining Machinery Holdings Ltd (IMM) for $585 million to expand in China's fast-growing coal market.

TJCC Holdings Ltd, a unit of the US private equity firm Jordan Co LP, is selling its entire stake in IMM, which makes underground coal-mining machinery.

The agreement calls for Joy Global to buy 535 million IMM shares from TJCC for HK$8.50 ($1.09) each, a 30 percent premium over its last price of HK$6.55 on July 11. Joy Global will be required to make an offer for the remaining 59 percent of IMM once the share-purchase agreement is completed. IMM posted adjusted operating earnings of $90 million in fiscal 2010, on sales of $299 million. At least one estimate saw 2011 earnings growing to about $113 million. IMM would likely add to Joy Global's fiscal 2012 earnings, several analysts said, depending on how it pays for its purchase. The company said that it will finance the purchase with a combination of cash and debt, and may issue equity.

The Milwaukee-based Joy Global said the deal was part of its strategy of expanding in emerging markets. Although the major mines in China use foreign equipment, many others rely on domestic machinery.

The overall Chinese mining market is dominated by coal, of which 90 percent is underground, in contrast with the US coal market, which is mostly surface mining, according to the JPMorgan analyst Ann Duignan in a research note.

The IMM deal is Joy Global's second in a matter of weeks, part of a strategy that analysts have called at least partly defensive. In May, it said it would buy Rowan Companies Inc's drilling and mining gear unit for $1.1 billion. The deal follows rival Caterpillar Inc's purchase of its mining machinery competitor Bucyrus International Inc for $7.6 billion, a deal that leaves Joy Global as the last stand-alone US-based maker of such equipment.

After recession hit in late 2008, the price of many commodities such as copper, aluminum and iron ore fell as demand from manufacturers dropped off. Mining companies idled production and laid off workers.

But since last year, metals prices have rebounded sharply, prompting producers to reopen mines and start up idled projects. That has put a strain on supplies of equipment, with some producers complaining they cannot get adequate supplies.

Machinery suppliers have consolidated to gain scale.

Joy Global's deal marks a push into the underground-mining segment of an equipment market where Caterpillar largely does not participate, said Eli Lustgarten, an analyst at Longbow Research.

"Caterpillar is becoming a major force in the mining market, a powerhouse globally (that) offers mining customers one-stop shopping," said Lustgarten, adding that Caterpillar has a small market share in Chinese mining.

"This is part of the redoing of the landscape of the mining business," he said. "China's mining market is not nearly as important as China's purchases of commodities that drive commodity purchases globally."

Reuters