Timken Essay

892 Words Aug 4th, 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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It should be noted that the investment-grade rating means a rating category of BBB minus Baa3 assigned by a rating agency to protect obligations offered into the capital markets. This means that Timken should be concerned about losing its investment-grade rating because it determines how well it will be performing in capital market. However, Timken's financial ratios are relatively better compared with that of other companies. This is revealed by the fact that Timken’s rating is BBB. A rating of BBB or above represents an investment grade bond. Nevertheless, if Timken will finance the acquisition, its rating will fall below BBB and that its debt ratio will increase.
5. What is the price Ingersoll-Rand is likely to accept? Is Ingersoll-Rand likely to want a cash deal or a stock-for-stock deal?
IR is likely to accept an amount equal or more than $800 million. The case reveals that it is IR desire to allocate capital to higher potential growth and higher return service businesses so as to leverage its cross-selling strategy. The case also indicates that IR could not justify allocating substantial capital resources to maintain a leading competitive position in a consolidating, relatively slow growth-industry. This means that the IR is likely to want stock-for –stock deal.
6. Should Timken go forward with the acquisition at all?
No. Timken should abort the acquisition mission.
7. If Timken decides to go forward with the acquisition, how should they…

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