CHICAGO Timken Co.s
acquisition of Interlube Systems Ltd. to further diversify its
portfolio of businesses underscores the steel and bearings
manufacturers "blind eye" to the large conglomerate
discount impairing its share price, shareholders Relational
Investors LLC and the California State Teachers
Retirement System claim.
"While the Interlube acquisition
amm.com, March 13), along with Timkens
acquisitions of Greenbrier Cos. (
amm.com, March 1) and Wazee Cos. LLC (
amm.com, Jan. 2) over the past (few) months, may
be sound acquisitions in terms of supporting the bearings
business, none of the true value of these acquisitions can be
realized for shareholders as long as the conglomerate discount
continues to impair Timkens valuation in the
marketplace," the San Diego investment firm said March 13.
The investment firm and the
retirement fund have been pushing Timken to divest the steel
business since last summer and made that effort public toward
the end of the year (
amm.com, Dec. 3).
"We are confident that by
splitting Timkens shares to reflect independently traded
steel and bearings businesses, the company can unlock
significant shareholder value," Relational Investors said. "If
the Interlube acquisition complements the bearings business as
Timken asserts, then shareholders should be allowed to realize
the full value of the bearings business. Timkens
conglomerate structure impedes such valuation."
The Relational Investors and the
retirement fund, which together own 7.28 percent of
Timkens outstanding common shares, are asking all
shareholders to support their proxy proposal that Timkens
board of directors and management spin off Timkens steel
business into a separately traded public company.
Timken has said it has been
creating value for shareholders by making acquisitions and
paying down pension obligations, outside of which its stock is
"actually valued at a premium from a cash flow point of view,"
president and chief executive officer James W. Griffith told
He argued that the company had
worked on earnings volatility and sustainability over the past
six years by reallocating capital, including investing in the
business for organic growth and diversification. Timken also
has raised dividends and will consider share buybacks, Griffith