The Timken Company to Acquire Torrington This memo will examine Timken Company's decision to acquire Torrington by examining the stand-alone value of Torrington, the synergies of this acquisition and the effect on Timken's investment grading. Acquiring Torrington seems to fit well with Timken's long term growing strategy. Torrington and Timken share 80% of their customers but only overlap 5% in their product offerings. Not only would this allow customers to make Timken a one stop shop for many of their needs but also according to a survey done by the University of Michigan, companies that were integrated were more profitable than those who focused on only one good. Acquiring Torrington would help in their efforts of becoming more global by increasing their presence in the global bearing market from 7% to 11%, making the two companies combined the third largest producer of bearings in the world. Finally, the acquisition of Torrington could give Timken an expected annual cost savings of 80 million dollars by the end of 2007, which are the expected synergies. Per calculation, Torrington’s stand-alone valuation is 192.789 million dollars (see Exhibit X), with the assumption that NWC equals 13.5% of sales. All of the numbers in this Exhibit are from the attachments of Timken case. EBIT, capital expenditure, net sales, and depreciation expense are from Exhibit 5 of the Timken case. Tax rate is calculated based on Timken Corporate Income Statements from Exhibit 1 of the Timken case. For the WACC calculation, cost of equity is calculated the assumption of a risk premium of 6.5%, since the market premium decreased over time from 7.1% to 4.7% and it is reasonable to assume that the market premium would be close to 6% by 2002. Risk free rate and cost of debt is from Exhibit 9 of the Timken case. With the assumption that Torrington and Timken are similar to each other, beta is drawn from Exhibit 8 of the Timken case. Then, the weights of equity and debt are
The Timken Company
Due Date: Tuesday, Sept 17th, 2013, 5pm.
Presentation Date: Sept 18th, in class.
Please e-mail me an electronic copy of the report before the deadline. At the beginning of the class on Wed., please also submit a printed copy. The names of all group members should be specified at the top of the report.
For Lead Group: case report should be no longer than six pages of text (double space, Font 11, 1 inch margin on all sides). You should also include any additional financial….
THE TIMKEN COMPANY
Synopsis and Objectives
The acquisition of Torrington from Ingersoll-Rand (IR) required a strategy that would
meet both the investment and the financing objectives of the Timken Company. In that regard,
the case provides an excellent example of the principle that investment and financing decisions
can be considered independently. In effect, Timken captured the positive NPV of Torrington
even though Timken was required to increase its leverage beyond….
whether Timken should acquire Torrington company from Ingersoll-Rand by cash, issuing share to public or issuing share directly to IR. IR wanted to divest Torrington and Timken aim to acquire it. After merging with Torrington Timken will be world third largest company in bearing industry and Timken would gain more sales as Timken and Torrington has about 80% of overlapped customer. Moreover after the synergy they can reduces cost, increase market shares and have more production lines. As Timken leverage….
GENEVA BUSINESS SCHOOL
Master of Science in Finance
Final Assignment June 2011
The Timken Company
Student : Nguyen Hoang Ngoc Anh
Professor: Dr. John Heptonstall
Subject: Strategy and Financial
I. The bearing industry
Bearings industry of various sizes and specifications found their way into everything from space shuttles to household appliances, automobiles, dentist drills, roller skates, and computer disk drives. The bearing industry was facing a variety….
The Timken Company
Top management of Timken hires you as consultants to perform an independent analysis and recommend the best, in your opinion, course of action in the proposed acquisition of the Torrington Company. Your task is to write a report that will address their questions and concerns, in particular: 1. 2. 3. 4. How does Torrington fit with the Timken Company? What are the expected synergies? What is your stand alone valuation of Torrington? What is your with-synergies valuation of Torrington….
THE TIMKEN COMPANY
In 2002, The Timken Company was considering acquiring The Torrington Company from Ingersoll-Rand. The acquisition would make a clear statement to the market about Timken’s commitment to remain a worldwide leader in the bearing industry as it would result in the combination of more than 100 years of bearing manufacturing and development experience.
Because the two companies shared many of the same customers but had few products in common, customers would surely appreciate the….
From our DCF calculations, the value of Torrington as a stand-alone entity is $1.181 billion. However, the maximum purchase price for Torrington should only be $641 million. The optimum debt amount for this transaction would be $301 million. This amount of debt would result in a total debt to capital ratio for Torrington of 47%, within the range for a BBB “investment grade” debt rating. The combined entities, Torrington-Timken, would produce an interest coverage ratio of 3.2, and a….
Gordon East, IT Manager, Timken
Timken, a 109-year-old company, is a longtime leader in the production of antifriction bearings and specialty steel. The company began as a carriage maker before the advent of the mass production of automobiles and now has offices in 27 countries and 25,000 employees. Timken competes in a global marketplace that requires companies to adapt to ever-changing financial conditions.
Executives at Timken were anxious to rebuild the company’s….
ECONM2021Cases in Financial Management |
THE TIMKEN COMPANY |
(Word Count: 4000) |
Candidate Nos.380843767942568 |
The Timken Company – a leader in the bearing industry, is considering acquiring the Torrington Company from Ingersoll-Rand. Torrington – an engineering solutions segment of the Ingersoll-Rand. The main motive of acquisition is to enhance Timken’s market share and product base. Operating synergies are highly expected from this merger with 80 million….
1) How does Torrington fit with The Timken Company? What are the expected synergies?
Timken, is the inventor of the tapered roller bearing, and Torrington, the pioneer and leading global producer of needle roller bearings, have only a 5% overlap in their product offerings; together would make Timken a formidable company. The acquisition of Torrington will substantially broaden Timken’s product portfolio and enable deeper penetration of the global market. After the acquisition Timken will be listed….