The Timken Co. has hired investment firm Goldman Sachs and created a special committee to look into whether it should split itself into two.
The announcement, which came after the stock market closed Monday, does not mean the $5 billion Canton bearings and steel maker has decided to spin off its steel division, a company spokeswoman said.
Timken’s board of directors earlier this month decided to form a “strategy committee” to look into separating its bearings and steel businesses into separate, publicly traded companies.
Timken’s largest shareholder and a financial partner last month got enough votes at the company’s annual meeting to pass a nonbinding resolution calling for Timken to spin off its steel business as a means to maximize shareholder value. The proposal won 53 percent of shareholder votes.
Timken’s board had vigorously opposed the resolution by the $167 billion California State Teachers Retirement System, or CalSTRS, pension fund and investment firm Relational Investors. CalSTRS owns about 0.4 percent of Timken shares. Timken’s board argued that it makes the most sense and creates the most shareholder value keeping the bearings and steel businesses together.
Relational, also in California, is Timken’s single-largest shareholder with about more than 6.6 million shares, or 6.9 percent of outstanding shares. (At Monday’s closing price, Relational’s shares were valued at about $380 million.) CalSTRS and Relational, which manages money for other pension funds, have a close working relationship.
The Timken strategy committee is expected to report its recommendations to the full board by Sept. 30, the end of Timken’s third quarter.
The strategy committee is made of up Timken’s independent board members. There are no Timken family members on the committee, the company said in a statement.
The committee chairman is Joseph W. Ralston, Timken’s lead board director.
“The board values the feedback we received from our shareholders through the course of the proxy process as well as at our recent annual meeting,” Ralston said in a statement. “The committee, with the aid of outside advisors, is carefully evaluating options related to corporate structure as well as shareholder input on corporate governance and capital allocation. The company expects to report on the results of the committee’s evaluation by the end of the third quarter.
“Our committee is approaching this work with the objective of maximizing shareholder value,” Ralston said. “As we conduct this evaluation, Timken will continue implementing its current strategy to further improve shareholder returns while remaining focused on serving and creating value for customers.”
The announcement does not mean the company will decide to spin off the steel division, Timken spokeswoman Pat Carlson said.
“It’s a very complex issue,” she said.
Goldman Sachs will act as counsel to the strategy committee as it takes part in a comprehensive analysis, Carlson said.
The Timken board does not have a deadline or timetable to act once it gets the strategy committee’s recommendation later this year, she said.
Relational and CalSTRS could not be reached immediately for comment.
Shares of Timken on Monday fell 24 cents to $57.44. Shares are up 21.1 percent, including dividends, since Jan. 1 and are up 22.6 percent from a year ago.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
