Timken has reached an agreement with Ingersoll-Rand to acquire its Torrington subsidiary, a producer of needle roller, heavy-duty roller and ball bearings and motion control components and assemblies, for cash and stock valued at approximately $840 million.
The board of directors of Timken and Ingersoll-Rand have unanimously approved the agreement. Upon completion of the acquisition, Timken will be the world’s third largest bearings company with approximately $3.6 billion in annual revenues.
Under terms of the agreement, Ingersoll-Rand will receive $700 million in cash and $140 million in Timken shares. The transaction, which is subject to antitrust clearance, successful completion of debt and equity financing, and customary closing conditions, is expected to close during the first quarter of 2003.
Timken expects the acquisition to be accretive to earnings per share by at least 10% in 2003. Timken expects to achieve annual cost savings of approximately $80 million to be fully phased in by the end of 2005, with approximately $20 million realised in the first year. This is in addition to the previously announced $80 million in annualised savings Timken expects to realise by the end of 2002 from a manufacturing strategy the company launched last year.
The $700 million cash component of the transaction will be financed through a new senior credit facility underwritten by Bank of America, Key Bank, Merrill Lynch & Company and Morgan Stanley, a public offering of senior notes, and proceeds from a public offering of 11 million Timken shares.
Timken expects to continue to pay its current quarterly dividend of $0.13 per share and expects to retain its investment grade credit ratings. Based on the current Timken share price, the Timken shares to be received by Ingersoll-Rand will represent approximately 11% fully diluted ownership in the larger Timken Company. Ingersoll-Rand has agreed not to sell those shares for 6 months after the transaction closes.