The Timken Company (USA;
NYSE:
TKR)
has confirmed it will divest its Torrington needle roller bearing business to JTEKT Corp. (Japan
Tokyo:
6473; 5251R9N7).
The sale includes Timken's entire needle roller bearing business and operations, including all facilities,
inventory, intellectual property and business assets, and product portfolio.
JTEKT will pay Timken approximately USD $330 million in cash, subject to working capital adjustments,
and has reportedly agreed to complete the acquisition by the end of 2009.
Timken acquired the various Torrington bearing and steering gear businesses from Ingersoll-Rand in 2003, paying
$880 million. Subsequent divestitures of Torrington's non-core steering gear and specialty bearing operations
reduced that investment substantially; Timken had eventually pared it down to just the core needle
roller bearing business.
The product line includes a wide array of needle roller bearings, from radial and thrust bearings to
assemblies and loose needles. Target markets are primarily automotive, with some industrial.
Timken has been widely faulted by employees and customers for failing to ever get a handle on integrating
or leveraging Torrington's
potential. Manufacturing assets, management, sales and marketing, and product development efforts
remained largely separate; integration had been hit-and-miss.
Since 2003, a number of analysts have questioned Timken's ability to muster enough management bench strength
to run the Torrington business, and criticized it for underestimating the management depth, skills and resources
necessary to make such a large acquisition successful. Until Torrington, however, Timken in its history had
never made such a large acquisition; compounding that challenge, I-R had Torrington on
the market for so long, and its future became so cloudy, that Torrington was weakened by the departure
of many key employees with the skills and experience Timken so badly needed.
In addition, Timken was saddled with several unexpected legacy issues, such as belatedly discovering
I-R had used generous terms and discounts to pump up Torrington sales and cram the distribution chain full of
slow-moving bearings -- leaving Timken trying to explain away several periods of unexpectedly slow sales
for Torrington as its distributors sold down bloated inventories.
In the end, however, the divestiture decision apparently came down to Timken's changed strategic direction.
As the company moves away from relying on bearing sales to auto and truck
manufacturers, Torrington becomes less desirable: the vast majority
of Torrington's worldwide sales are into various levels of the auto industry.
On the other hand, JTEKT said the needle roller bearing business is an excellent fit to its own future, securing
it as the leading manufacturer of automotive bearings globally and significantly strengthening its industrial
bearing portfolio.
Approximately 3,400 employees in the following facilities involved in the sale:
- North America
- Cairo, Georgia
- Dahlonega, Georgia
- Sylvania, Georgia
- Greenville, South Carolina
- Walhalla, South Carolina
- Bedford, Quebec, Canada
- Europe
- Brno, Czech Republic
- Olomouc, Czech Republic
- Maromme, France
- Moult, France
- Vierzon, France
- Kuensebeck, Germany
- Bilbao, Spain
- Asia
Jim Griffith, Timken's President and CEO, said: "This transaction is a major step forward in our strategy to
transform our portfolio to focus on industrial sectors with strong aftermarkets. It positions us to
concentrate our resources on areas where we can realize mutual value with our customers."
JTEKT President, Motohiko Yokoyama, said: "This transaction sends a clear signal of JTEKT's commitment to the
automotive industry and enables us to achieve our goal of being the world's leading automotive bearings manufacturer.
We have known and admired the excellent team at Timken's needle roller bearings business for a number of years
and look forward to the contribution the team will bring to JTEKT in developing cutting-edge products, including
technologies that improve engine fuel economy and vehicle emissions. The operational fit and future growth
prospects make this an excellent transaction for our customers, employees, and shareholders."
Mr. Yokoyama went on to note that JTEKT will now be in a better position to benefit from the expected
economic turnaround in both automotive and industrial. For automotive, that includes a tighter focus on fuel
efficiency and emissions, both areas
where needle roller bearings come into play. In addition, JTEKT will now have a geographic supplier advantage
in supporting a wider customer base, particularly in fast-growing Asian markets.
JTEKT did not indicate where the needle roller bearing business will fit in its organization. Also, the companies
made no announcement about how the semi-shared facility in Wuxi, China will operate; Timken recently added
large industrial bearing capacity there.
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