Timken’s announcement that it will explore splitting itself into two publicly traded companies is seen as a hopeful sign by its largest shareholder, which has pushed for such a division.
California-based Relational Investors and the California State Teachers Retirement System pension fund, or CalSTRS, issued a joint statement after Timken’s decision, saying they continue to believe separating the bearings and steel divisions is in the best interests of shareholders.
The shareholders said they “look forward to the [Timken] board taking final action” on spinning off the steel division.
The two longtime financial partners in May succeeded in persuading a majority of stockholders to back a nonbinding resolution calling for a spinoff, saying that will enhance shareholder value.
Canton-based Timken late Monday announced it had hired investment firm Goldman Sachs and set up a special committee to look into spinning off its steel division into a publicly traded company.
The company’s board of directors unsuccessfully fought the spinoff proposal, saying shareholders are best served by the $5 billion company’s current strategic plan that keeps bearings and steel under one corporate roof. The company has said that over the years it has looked into separating the steel and bearings businesses.
Shares of Timken on Tuesday rose 14 cents to $57.58 on a day when major U.S. stock indexes were down.
“CalSTRS and Relational Investors acknowledge the announcement from Timken and are hopeful the committee will adhere to the clear message that shareholders sent at the annual meeting regarding the spin-off of the steel business to unlock shareholder value,” said CalSTRS spokesman Ricardo Duran.
By one count, the nonbinding resolution was supported by 53 percent of Timken shareholders.
Relational and CalSTRS said if Timken-controlled shares were subtracted from the vote, the margin in favor of separating the company was substantially larger.
“More than two-thirds of unaffiliated shareholders voted in favor of the CalSTRS proposal at the May annual meeting to direct the board to split the company into separate publicly traded steel and bearings businesses,” Duran said.
Relational owns about 6.9 percent of Timken shares, while the $167 billion CalSTRS fund owns about 0.4 percent of the Canton manufacturer.
“CalSTRS and Relational Investors remain steadfast in our view that splitting the company is in the long-term best interest of stakeholders and we look forward to the board taking final action in this regard,” Duran said.
Timken said that its decision to hire Goldman Sachs and form a special committee did not mean that it was definitely going to split the company apart. The committee is charged with making its recommendations to the full Timken board by the end of the company’s third quarter — that is, the end of September.
Timken shares since Jan 1 have gone up 21.4 percent, including dividends. Shares are up 27.4 percent from a year ago and have increased 25.6 percent since the Relational/CalSTRS proposal was made public Nov. 28. Relational met with Timken’s board last August to urge the company to spin off its steel division.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal. com.