Market Overview

Greenbrier in Deal with Timken, Exiting Wheelset Roller Bearing Reconditioning Business


The Greenbrier Companies, Inc. (NYSE: GBX) announced today it has entered an asset purchase agreement with The Timken Company (NYSE: 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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