The two Timken Co. shareholders pressuring the Canton manufacturer to spin off its steel business are ratcheting up a public relations campaign with strongly worded criticisms.
Relational Investors and the California State Teachers’ Retirement System (CalSTRS) on Monday sent out to Timken shareholders what they call a supplement to a related letter released last week.
The supplement seeks to buttress Relational’s and CalSTRS’ argument that Timken shareholders are best served by splitting the company into two publicly traded companies.
Timken declined to respond directly to Monday’s presentation. The company sent out its own letter to shareholders urging them to vote against what it called a “misguided” and “ill-advised” proposal from Relational and CalSTRS.
The California-based shareholders say in part that if Timken does create separate steel and bearings companies, that will result in the equivalent of $68 per share, up from Monday’s closing price of $51.82. If the nonbinding resolution is turned down, shareholders risk the stock price falling to $39 a share, they argue. The two shareholders have a longtime history of working together.
Relational and CalSTRS valued their combined holdings at about $400 million. If spinning off the steel business increased share prices by 30 percent, as the two shareholders argue could happen, that would drive up the value of their stake by $120 million, with the bulk of that increase benefiting Relational.
The Relational and CalSTRS shareholder resolution goes to a vote at Timken’s May 7 annual meeting. The two shareholders went public with their proposal last November. Relational owns about 6.9 percent of Timken stock; CalSTRS, a $161 billion pension fund run to benefit California teachers, owns about 0.4 percent of Timken shares.
“CalSTRS and we are not going to let Timken’s board off the hook,” Relational said in a statement. “It is simply not in the best interests of Timken shareholders to be deprived of the true and fair value of their investment given the long-term potential of the company’s steel and bearings businesses, so that the Timken family-dominated board can continue to perpetuate a business structure that apparently only serves their interests.”
Timken previously has rejected splitting up the company, saying shareholders are best served by policies and strategies put in place by senior management and the board.
The two sides have competing websites. Timken’s site is www.TimkenDrivesValue.com. The Relational and CalSTRS site is www.UnlockTimken.com.
“Timken laughably asserts that it practices good corporate governance,” Relational and CalSTRS said in a letter it sent to shareholders last week.
Criticisms include Timken family members holding three of 11 board seats; Chairman Ward Timken receiving $37 million in compensation since 2005; poor “pay for performance” ratings; and that the board has “long been unwilling to thoughtfully consider” separating the steel and bearings businesses, the shareholders said.
“There is no downside to voting for the proposal, which creates a free option to benefit from further stock price appreciation,” the shareholders said. Timken is wasting money by trying to defeat their proposal, they said.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
