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Danny Indi Puruhita Dian Permata Sari

Fransiska Silaban
Ratu Hasanah Semarini

Timkken Company

INTRODUCTION
Tahun
2002
Timken
mempertimbangkan
mengakuisisi the Torrington Company dari Ingersoll
Rand.
Potensi penghematan biaya tahunan Timken dari
akuisisi ini diperkirakan $80 juta.
Apabila harga akuisisi yang dibayarkan terlalu tinggi,
maka Ingersoll-Rand akan memperoleh nilai sinergi.
Apabila
akuisisi
yang
dilakukan
Timken
menggunakan utang baru, maka grade rating
investasi Timken akan mengalami downgrade

THE BEARING INDUSTRY


Bearing industry merupakan industri sekunder
dalam industri baja, sehingga kebijakan dalam
industri baja tidak selalu menguntungkan
mereka.
Pengiriman kawat gulung tumbuh sepanjang
tahun 1990an dan puncaknya pada 1998, sales
$5,8 miliar.
Tahun 2001 sales turun menjadi $5,3 miliar,
karena resesi ekonomi, dan serangan teroris 11
September 2001.

THE BEARING INDUSTRY


Pada tahun 2003 diprediksi flat dan cenderung
naik 2 sd 3%
Penjualan tahun 2005 meningkat 6,5% menjadi
$42 miliar
Ekspansi
Cina
menghasilkan
kebijakan
antidumping.
Pemain industri: SKF (Swedia, market share
20% di seluruh dunia); Timken; dan SKF.

THE BEARING INDUSTRY


COMPANY
SKF LTD.
NSK LTD.
TIMKEN LTD.

SALES 2002

EMPLOYEE 2002

US$4,8 miliar

39.000

Swedia

22.000

Tokyo, Jepang

18.000

Canton-Ohio, US

US$3,62 miliar
US$2,55 miliar

BASIS AREA

THE TIMKEN COMPANY

Timken Business Unit

Ingersoll-Rand

MERGED

Ingersoll Rands Segment

25 % of consolidated
sales

27 % of consolidated
sales

15 % of consolidated
sales

33 % of consolidated
sales

17% of income
among all segments

28 % of income
among all segments

43 % of income
among all segments

22 % of income
among all segments

The Torrington Company


Excelsior Needle Company didirikan pada
1866
Melebarkan bisnis ke industri otomotif
WW II banyak memproduksi bearings
1969 diakuisisi oleh Ingersoll-Rand
Torrington:
Automotive
Industrial

The Torrington Company


Sales
North America: 73%
Europe : 17%
Others : 10%

10.500 karyawan
27 pabrik
2002
Revenues : $1,204 bio
Operating income : $85,2 mio

2007
Revenues : $1,65 bio
Operating Income : $116,7

Timken
2002: companywide restructure
Berencana menambah produk baru ke
dalam portofolio bundling

CASE QUESTION
1. How does Torrington fit with the Timken Company? What are the expected
synergies?
2. What is your stand-alone valuation of Torrington? Be prepared to explain and
justify all the major assumptions used in your estimate.
3. What is your with-synergies valuation of Torrington? Be prepared to explain
and justify all the major assumptions used in your estimate.
4. Should Timken be concerned about losing its investment-grade rating? How
do Timkens financial ratios compare with those of other industrial firms in
2002? How would those ratios change if Timken borrowed $800 million, for
example, to buy Torrington?
5. If Timken decides to go forward with the acquisition, how should Timken offer
to structure the deal? Is Ingersoll-Rand likely to want a cash deal or a stockfor-stock deal?
6. What are the risks for Ingersoll-Rand of accepting Timken shares for some or
all of the consideration?

Bagaimana Torrington Dapat


Sesuai dengan Timken?
Segmen bisnis yang sama otomotif dan
industri
Sifat produk komplementer, bukan
substitusi portofolio Timken
Memiliki keahlian masing-masing

Synergies
Pemain terbesar ke 3
Meningkatnya value added kepuasan
pelanggan
Penghematan biaya tahunan $80 juta
Market share Timken 7% 11%
Utilisasi jaringan distribusi Timken

2. Stand Alone Valuation of Torrington


Assumptions

Cost of funds

Weighting

Weighting Cost

Debt (462,20)

4.35%

0.30

1.31%

Equity (1,065.12)

10%

0.70

7.31%

WACC

8.62%

Stand Alone of Torrington


Discounted Cash Flow Model
Free CF : Operating Inconme + Depreciation
expense Tax expense Capex Change in
WC
Change in WC : 10.43% of change in sales
Terminal CF rate : 4%
Terminal CF : Final projected year CF * (1+
terminal value rate) (DR-terminal value rate)

Stand Alone of Torrington


Discounted Cash Flow Model
CF

2002

2003

2004

2005

Net sales

1204

1282

1,365

1,454

84

90

96

1,107

1,179

1,255

91

97

(175)

Depreciation Expense

80

Operating expense

1,039

Operating Income

85

Capital Expenditure

( 41)

Tax Expense

(34)

2006

2007

1,549
102

1,649.2
108.5

1,337

1,424.0

103

110

116.70

(130)

(140)

(150)

(160.0)

(36)

(39)

(41)

(44)

(46.5)

changing in WC

(8.14)

(9)

(9)

(10)

(10.5)

Free Cash Flow

(44.4)

9.4

8.6

8.0

8.2

Terminal cash flow

Total

` (44)

183.7
8

192

Stand Alone of Torrington


Multiples Valuation
Enterprise Value / EBITDA : 5.90 (exhibit
8,refer to Timken Co)
EBITDA : 165
Enterprise Value : 5.90 x 165
: 975

3. What is your with-synergies valuation of Torrington? Be prepared to


explain and justify all the major assumptions used in your estimate.
KETERANGAN
Cost Saving
Cost Saving (after tax)

2002

2003

2004

2005

2006

40

50

60

70

80

24.5

30.06

36.07

42.08

48.09

Perpetuity Value

557.95

Integration Cost

(65.00)

(65.00)

CF

(40.95)

(34.94)

NPV (sinergy value)

2007

36.07

42.08

$391.89

Asumsi :
1)Tarif pajak tidak berubah sejak tahun 2012 (39.88%)
2)Cost saving terus meningkat hingga tahun 2007 mencapai US$ 80 juta,
setelah itu cost saving diperkirakan konstan3
3)WACC :8.62%

606.04

4. Should Timken be concerned about losing its investment-grade rating? How do


Timkens financial ratios compare with those of other industrial firms in 2002? How would
those ratios change if Timken borrowed $800 million, for example, to buy Torrington?

Financial Ratio

Financial Ratio Cotd

Financial Ratio Cotd

Financial Ratio Cotd

Financial Ratio Cotd

Bearing Companies

Kaydo
n

NN Inc

Timke
n

Commer
cial

Metal
Usa

Mueller
Industries

Precision Castparts Corp.

Quane
x
Corp.

Worthington
Ind.

EPS

0.84

0.16

1.70

1.34

1.61

2.35

5.26

1.83

2.48

PE

23.86

59.96

9.88

13.39

0.00

11.02

4.12

18.94

7.53

15%

10%

6%

0%

13%

18%

13%

9%

EBITDA/
Sales
%

21.50
%

5. If Timken decides to go forward with the acquisition, how should


Timken offer to structure the deal? Is Ingersoll-Rand likely to want a
cash deal or a stock-for-stock deal?

Proforma

Cash Deal with IPO Stock for


EFN

Before
2002
DCR 43.09%

DCR

43.09
%

Bond Rating = BBB

After
7%
62,73%
Adding EFN
with Equity
$777.23

11%
62,67%
Adding EFN
with Equity
$792.99

45.24%

44.95%

Financial ratio
Liquidity
Ratio
Current
Ratio
Quick
Ratio

2002- 20022002 7%
11%

Cash Ratio
Working
Capital

1.53 1.54

1.55

0.76 0.76

0.77

0.13 0.13

0.13

334.2 365.3 383.1


0 7
8

Financial ratio
Leverage
Ratios

2002- 20022002 7%
11%

Total Debt To
Assets

0.09

0.04

0.04

Debt-Equity
Ratio

0.32

0.10

0.10

Equity
Multiplier

3.50

2.55

2.55

NPV Torington
cash Acquisition
Net sales
Operating
income
Sales growth

1999

2000

2001

2002

2003E

2004E

2005E

2006E

2007E

$1,239.50

$1,161.00

$1,004.30

$1,204.00

$1,282.00

$1,365.30

$1,454.10

$1,548.60

$1,649.20

$ 145.70

$ 172.60

$ 102.90

$ 109.50

$ 116.70

-6.3%

13.5%

19.9%

6.5%

6.5%

6.5%

6.5%

6.5%

78.00

85.20

90.70

96.60

Operating
margin
Capital
expenditures

11.8%

14.9%

7.8%

7.1%

7.1%

7.1%

7.1%

7.1%

7.1%

84.00

85.00

45.00

41.00

$ 175.00

$ 130.00

$ 140.00

$ 150.00

$ 160.00

Depreciation
expense
OCF

75.00

77.00

79.00

80.00

90.00

96.00

$ 102.00

$ 108.50

56.60

58.90

61.50

65.20

47.97

45.96

44.18

43.12

Initial Outlay

$
(130.00)
$ 181.14
NPV

84.20

$
(0.10)
$
(0.09)

51.14

NPV Torrington dengan mempertimbangkan WACC 8.62%

6. What are the risks for Ingersoll-Rand of accepting Timken shares for
some or all of the consideration?

Valuasi harga saham yang tidak tepat


Volatilitas harga saham

TERIMA KASIH