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The Timken Company

THE TIMKEN COMPANY Teaching Note Synopsis and Objectives The acquisition of Torrington from Ingersoll-Rand (IR) required a strategy that would meet both the investment and the financing objectives of the Timken Company. In that regard, the case provides an excellent example of the principle that investment and financing decisions can be considered independently. In effect, Timken captured the positive NPV of Torrington even though Timken was required to increase its leverage beyond its capital-structure objective. To retain its investment-grade rating, Timken used the capital market shortly after the acquisition to reduce its leverage by issuing equity and retiring debt. Because of Timkenā€™s sequential financing strategy, the case illustrates the complexities of managing large-investment decisions that have a short-term impact on…