LOS ANGELES Greenbrier Cos. will sell its Kentucky roller bearings operation to Timken Co. and enter a long-term supply agreement with Timken for rail car wheel bearings.
The Lake Oswego, Ore.-based rail car and barge builder said it will sell substantially all the equipment used in its reconditioned wheelset roller bearings operation in Elizabethtown, Ky., to Timken. Under the supply agreement, the Canton, Ohio-based steel and bearings producer will supply Greenbrier with reconditioned and new bearings.
The financial terms of the deal, which is expected to close by the end of Greenbriers fiscal third quarter ending May 31, were not disclosed.
While the Elizabethtown operation is profitable, recent regulations related to reconditioned components and "a constrained availability" of certain key materials have "diminished the strategic value" of the plant, according to Greenbrier.
The company said Timkens role as a global bearings manufacturer with four U.S. rail bearing reconditioning facilities "brings scale and experience" to the agreement, ensuring Greenbrier a "steady, long-term supply" of bearings while eliminating Greenbriers cost of maintaining its own operation, freeing up about $10 million in capital.
Greenbrier said the move is consistent with the companys strategy of reducing noncore capital assets.
"With the completion of this transaction, we are well positioned to focus on our core strengths of heavy rail car repair, refurbishment, complete wheel services and routine rail car maintenance and pursue the growth opportunities that these areas offer," Greenbrier Rail Services president Timothy A. Stuckey said in a statement.
Brian Ruel, vice president of off-highway, light vehicle systems and rail for Timken, said in a statement that the agreement "aligns with our strategy to grow our service portfolio and invest in the rail business."
The deal does not include Greenbriers Elizabethtown roller bearings plant, which was acquired in 2008 and will be sold after the transition.
A Greenbrier executive couldnt be reached for further comment.
Both companies have been under pressure from outside investors. Greenbrier late last year fended off a $597-million takeover attempt by American Railcar Industries Inc., controlled by billionaire investor Carl Icahn (amm.com, Dec. 28), while some investors in Timken have been urging the company to separate its steel and bearings businesses (amm.com, Feb. 19).