DISCUSSION TOPIC - 1. Did Torrington have to sell to IR?

The late 60s were a time of conglomeration. Companies were buying out other companies not solely with the intention of growing the businesses they were in. Rather, it was take over any company you could find that was undervalued by the stock market, whether or not you had any expertise running that business. These Companies were more like predators skilled in the machinations of Wall St., out to find a good deal, buying and selling companies.

Torrington had to have been a very attractive package and the proof of that is the premium IR paid to bring Torrington on-board, i.e. providing a share of preferred stock paying a dividend of $2.35 and 0.4 of a share of IR stock for each Torrington share. The new stock provided a dividend of $3.15 per share vs. the $1.60 that Torrington had been paying.

Torrington management did indeed negotiate a good deal for its stockholders, and took the safe and easy route to expansion by tapping IR’s definitely deep pockets. Unfortunately and sadly, Torrington gave up its autonomy, the self determination of its future.

Does any one know if Timken was ever faced with that dilemma?

Torrington had just gone big-time a few years earlier in 1960 when it got itself listed on the New York Stock Exchange. Milt Berglund moved up to Chairman, Bob Reid became President and Don Lewis and Ray O’Connell new Executive Vice Presidents.

Without a doubt, they constituted a plethora of brain power. Berglund, the hard driving no nonsense engineer, Bob Reid, the paramount polished Ivy Leaguer, O’Connell, the brainy MITer and Don Lewis, the just as capable UCONN engineer.

If one of these officers had a greater influence on the sell out, I would say it was Ray O’Connell because he had spent the prior few years as Torrington’s marketing expert and director of planning where the responsibility is not only to study the strengths and weaknesses of the existing operations but also to assess the possibilities of the future.

I believe he would have seen that Torrington was entering a period of tremendous growth which could be satisfied only by expanding and building more plants. This of course required outside financing. That would mean leveraging the Company , taking on more debt than it had ever done before. In the past, the Company had resorted to debt but only in so far as it could be repaid promptly.

All in the management were “nice guys” and the top mechanical engineers you could find anywhere. What did they lack as managers? I propose, none had any financial background. None had the level of experience and capability in business finance that compared to their expertise in Engineering. Why? Because apparently they did not give Finance as much importance as Engineering otherwise they would have brought on board some type of Harvard/ Stanford/ Wharton MBA with experience in investment banking, wheeling and dealing on Wall St. and perhaps as capable and intelligent as they were but instead in Business Finance.

Another theory of why they did not bring on some high level persons in the financial area is that, in the past, the Company had been run by non-engineer accounting types who had kept such a tight fist on the purse strings that manufacturing and engineering’s progress had suffered from lack of appreciation of their needs. When these Engineers became the ruling management, they were not about to let themselves revert back to that type of domination.

Instead they were satisfied with the likes of Walter Hudson, Bob Cron and Rae White. These too were “nice guys” but I don’t think anyone of the three had the abilities to assess what was going on in the world of conglomeration , provide alternatives to selling out and help navigate through the era. To add insult to the function, a manufacturing person, Larry Smith, was named Vice President - Finance and later a manufacturing planning and production specialist, Bob Breckinridge replaced him but by then the Corporate Financial function had been taken over by IR and the last two appointments were not as critical.

To its credit, management did hire White Weld for advice, a NYC investment banking outfit. I feel, though, our management was overwhelmed by these big city people especially when they were told that their personal assets would be in jeopardy from potential stockholder suit if they did not submit to the best offers of the predators.

To answer the question first posed, No , I do not think Torrington had to sell to IR.

If management had beefed up the in-house financial/stock market/Walk St. dealing expertise, developed a professional campaign to bring around a majority of stockholders and published a plan to get the Company through the onslaught. Seeing the success the Company had had since its founding, I am fairly confident that the shareholders would have been willing to give it a try and not sell out.

It’s second guessing. The benefit of retrospective second guessing. What do you think?

Norm Massicotte