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Shareholders claim Timken turning 'blind eye' to value

Keywords: Tags  Timken, James Griffith, Interlube Systems, Greenbrier, Wazee, Relational Investors, California State Teachers Retirement System, Corinna Petry

CHICAGO — Timken Co.’s acquisition of Interlube Systems Ltd. to further diversify its portfolio of businesses underscores the steel and bearings manufacturer’s "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 (, March 13), along with Timken’s acquisitions of Greenbrier Cos. (, March 1) and Wazee Cos. LLC (, 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 Timken’s 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 (, Dec. 3).

"We are confident that by splitting Timken’s 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. Timken’s conglomerate structure impedes such valuation."

The Relational Investors and the retirement fund, which together own 7.28 percent of Timken’s outstanding common shares, are asking all shareholders to support their proxy proposal that Timken’s board of directors and management spin off Timken’s 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 investors recently.

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 has said.

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