The Greenbrier Companies,
Inc. GBX announced today it has entered an asset purchase agreement
with The Timken Company TKR for sale of substantially all the equipment
utilized in Greenbrier's reconditioned wheelset roller bearing operations in
Elizabethtown, Kentucky ("Elizabethtown"). Concurrent with the sale,
Greenbrier will enter into a long-term supply agreement with Timken for
reconditioned and new bearings. The companies did not disclose the asset
purchase price. Closing of the transaction is expected before the conclusion
of Greenbrier's fiscal third quarter ending May 31, 2013.
Greenbrier acquired Elizabethtown in 2008 to provide reconditioned wheel
bearings for use in Greenbrier's Wheel Services, Refurbishment & Parts
segment. Elizabethtown has employed an average of 100 people during
Greenbrier's last two fiscal years and is Greenbrier's only wheelset roller
bearing reconditioning facility. The operation is profitable. However,
recent changes in rules related to reconditioned components and a constrained
availability of certain key materials has diminished the strategic value of
this operation rendering it a non-core asset to Greenbrier. As a global
bearing manufacturer with four rail bearing reconditioning facilities in the
US, Timken brings scale and experience to the supply agreement. This ensures
Greenbrier a steady, long-term supply of new and reconditioned bearings, while
eliminating Greenbrier's costs of maintaining an internal operation to meet
its supply needs.
The effects of eliminating internal production of bearings and entering into
the supply agreement are expected to be accretive to Greenbrier's earnings and
liberate approximately $10 million in capital. It is consistent with
Greenbrier's corporate strategy to reduce non-core or underperforming capital
assets and improve capital efficiency, while also increasing capital available
for reinvestment opportunities that enhance the performance of Greenbrier's
integrated business model. These efforts are designed to increase
Greenbrier's return on invested capital, improve gross margins and enhance
value to shareholders. This strategy will be described in greater detail when
Greenbrier announces its financial results in early April for its second
fiscal quarter ending on February 28, 2013.
"With the completion of this transaction, we are well positioned to focus on
our core strengths of heavy railcar repair, refurbishment, complete wheel
services and routine railcar maintenance and pursue the growth opportunities
that these areas offer," said Timothy A. Stuckey, president of Greenbrier Rail
Services. "We are pleased to partner with Timken to ensure that our
requirements for new and reconditioned wheelset roller bearings will continue
without interruption."
"Like Greenbrier, Timken is committed to improving the productivity, safety
and efficiency of our rail customers," said Brian Ruel, vice president of
off-highway, light vehicle systems and rail for Timken. "This agreement aligns
with our strategy to grow our services portfolio and invest in the rail
business."
To complete the asset purchase transaction, Greenbrier and Timken will
complete a transition plan over the course of Greenbrier's fiscal third
quarter. This will include preparing equipment and remaining inventory for
transfer to Timken facilities. The land and buildings owned by Greenbrier at
Elizabethtown are not included in the asset purchase agreement and will be listed for sale by Greenbrier after completion of the transition plan.
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