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Copy of Timken Case Study

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by

Gabriella Perez

on 28 June 2013

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Transcript of Copy of Timken Case Study

The Timken Company
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

Founded 1898
2002: Sales of $2.55 billion
Operations in 25 countries
18,000 Employees
Two-thirds of sales came from bearings
Timken's Operating and Financial Strategies
2002 Restructuring:
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
Positives:

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:

Financing Methods
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
Risks
Share prices
Percentage in ownership
Restrictions on the stock
Companies performing trends
Proxy Control
Ingersoll-Rand
$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
Stand-alone Valuation
Valuation with Synergies

Is this price justifiable?
WACC: 8.58%
Sales growth increase: 6.5% to 10%
Integration costs and cost savings must be considered
Terminal growth rate: 3%
Full transcript