CHICAGO Relational Investors LLC and the California State Teachers Retirement System, which together own 7.31 percent of Timken Co.s shares, are again asking the company to separate its steel and bearings businesses.
Relational analyzed such a proposal last year and presented it to Timken (amm.com, Dec. 3).
In a Feb. 19 letter to Timken chairman Ward J. Timken Jr., San Diego-based Relational and the teachers pension fund reiterated their analysis and excerpted third-party reports that they say demonstrate broad investment-community support for spinning off the steel business. Relational urged the board not to "continue to allow management to obstinately take the position that a spinoff of the steel business is not in the best interest of shareholders ... without providing any credible rationale."
Timkens board "continue(s) to act in the best interests of shareholders," the Canton, Ohio-based company said in an e-mail. "We engage with shareholders regularly and have met twice with representatives of Relational to share our perspective on their proposal."
Company leaders and third-party advisors have considered separating the steel and bearings businesses, the company said, but found "significant cost, technology and revenue synergies between (the divisions) as well as diversification benefits in continuing to operate under its current structure."
The loss of such benefits, alongside a potential reduction in financial flexibility, "would largely offset any near-term valuation increase that might result from a separation of the businesses at this time," Timken said.