The Timken Company 2
Executive Summary
In this case we analyst 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 ratio is not good, so they couldn’t raise cash that needed to be paid for the acquiring because if they did so the investment-grade rating will be deceased. Timken rating now is BBB so they couldn’t risk it to go lower. As Timken stock price is 19$/share they would have to require a lot of shares for the public to gain enough money for the acquisition and there is a risk that Timken couldn’t sell all of shares. For the last option is by issuing share directly to IR would benefit Timken as it will change capital structure reduce debt more equity. But it wouldn’t happen either because this option will make IR take the risk for holding to Timken stocks while they already have plan to invest in other segment. Our group suggests that Timken should acquire Torrington by issuing share directly to IR and pay cash by doing this will cause a win-win situation.
Introduction
Timken Company was a bearing company who was the manufacturer and also the developer at the same time. They have been operating their business for over 100 years which is well-known that their business is the leader in the bearing industry. In the year of 2002, the company was deciding in acquiring the Torrington Company from Ingersoll-Rand Company because they want the synergies to support their growth. Thus, Timken had to spend more than 80$ million in this acquisition which could make the company facing the financial troubles. That is if they
In this case we analyst 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 ratio is not good, so they couldn’t raise cash that needed to be paid for the acquiring because if they did so the investment-grade rating will be deceased. Timken rating now is BBB so they couldn’t risk it to go lower. As Timken stock price is 19$/share they would have to require a lot of shares for the public to gain enough money for the acquisition and there is a risk that Timken couldn’t sell all of shares. For the last option is by issuing share directly to IR would benefit Timken as it will change capital structure reduce debt more equity. But it wouldn’t happen either because this option will make IR take the risk for holding to Timken stocks while they already have plan to invest in other segment. Our group suggests that Timken should acquire Torrington by issuing share directly to IR and pay cash by doing this will cause a win-win situation.
Introduction
Timken Company was a bearing company who was the manufacturer and also the developer at the same time. They have been operating their business for over 100 years which is well-known that their business is the leader in the bearing industry. In the year of 2002, the company was deciding in acquiring the Torrington Company from Ingersoll-Rand Company because they want the synergies to support their growth. Thus, Timken had to spend more than 80$ million in this acquisition which could make the company facing the financial troubles. That is if they