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Copy of Timken Case Study
Transcript of Copy of Timken Case Study
Presented by: David Ortiz, Gabriella Perez, Andy Aguinaga, Jessica Mendoza and Somaly Phat.
What is The Timken Company?
U.S. leader in the bearing industry
2002: Sales of $2.55 billion
Operations in 25 countries
Two-thirds of sales came from bearings
Timken's Operating and Financial Strategies
Consolidate Operations into Global Business Units to Reduce Costs and Set the Stage for International Growth
Add New Products to Portfolio: Bundling
Higher Value Added Products
Purchase Torrington from Ingersoll-Rand
Increase Market Share within Global Industry from 7% to 11%
3rd Largest Producer of Bearings in the World
5% Overlap in Product Offerings and 80% Consumer Overlap
Expected Annual Cost Savings on $80 Million Annually by 2007
Hurdles to Acquisition:
BBB Rating Review
$130 Million Integration Costs
Structure of the Deal
Borrow $800 Million
Borrow $200 Million, issue additional $500 million in stock to raise cash and issue $100 million in stock to Ingersoll-Rand.
Method of Payment Options
Percentage in ownership
Restrictions on the stock
Companies performing trends
$8.9 billion global diversified manufacturer of industrial and commercial equipment and components.
Largest U.S. bearing manufacturer
4 different segments
The Torrington Company
Founded in 1866
Maker of sewing-machine needles
2002: $1.204 billion revenue
Operates in Automotive and Industrial Segments
Valuing the Torrington Company
Ingersoll-Rand's price tag for Torrington: $800 Million
Valuation with Synergies
Is this price justifiable?
Sales growth increase: 6.5% to 10%
Integration costs and cost savings must be considered
Terminal growth rate: 3%