Timken

904 Words Aug 16th, 2015 4 Pages
Timken Company Case
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The Timken Company Case 1. How does Torrington fit with the Timken Company? What are the expected synergies?
There are many ways in which Torrington fits with the Timken Company. Firstly, it is apparent that both companies understand the problems of their businesses and industry. This is because they both do business in the automotive and industrial bearings market. This means that the management will not change significantly. Instead, it will get reinforced. The fact that the acquisition will facilitate reconciliation of management styles and also accounting standards means that they fit each other. In fact it can be said that some of the reasons for acquisition include, but are not
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This is a lot compared to the cost saving of $80 million. Consequently, my stand alone valuation is that if the acquisition is expected to bring returns within short term basis, then the Timken Company should not acquire Torrington. However, if the goal of acquisition is long term return, then the acquisition can be carried. 3. What is your with-synergies valuation of Torrington?
Generally, it is apparent that there are elements supporting the acquisition and those opposing the acquisition. For example, the synergies such as management styles, customer base and the compatible business lines are synergistically related. However, the financial elements tend to disagree and lack synergies. Close analysis reveals that Timken would face significant challenges regarding the financing of the deal and that the accountants have placed Timken’s rating of Baal/BBB on review. The case reveals that if Timken manages to raise the needed cash, it is bound to compromise with its level of debt on the books. The Timken’s leverage ratio is likely to suffer and that Timken is likely to lose its investment-grade rating and may be forced to borrow the money at “high-yield” rates. This is worsen by the fact that Timken’s current performance is not good as it is still struggling to meet debts. 4. Should Timken be concerned about losing its investment-grade rating? How do Timken’s financial ratios compare with

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