CHICAGO Timken Co. shareholders have voted in support of a nonbinding proposal to spin off the companys steel business.
"We appreciate the thoughtful feedback weve received from our shareholders on the spinoff proposal as well as their broader input on corporate governance and capital allocation," chairman Ward J. "Tim" Timken Jr. said in a statement after the Canton, Ohio-based companys annual shareholders meeting May 7. "The board will carefully evaluate the views of our shareholders and announce next steps within 45 days."
About 53 percent of the votes castrepresenting about 47 percent of the companys outstanding shareswere in favor of a split, the company said.
A pair of investor groups, the California State Teachers Retirement System (CalSTRS) and Relational Investors LLC, began their campaign to "unlock value" at Timken last year, proposing the company separate its steel and bearings businesses.
After the proposal received the support of a "clear majority" of voters, CalSTRS and Relational said "the board must now acquiesce to the will of the shareholders consistent with their fiduciary duties."
Timkens directors "take their fiduciary responsibilities seriously and remain committed to driving shareholder value," Tim Timken added in a separate statement.
The affirmative vote is a first step in the possible spinoff process, according to CalSTRS and Relational.
"Should the board request our input in bringing about this separation to unlock stockholder value, CalSTRS and Relational stand ready to work with the board in achieving this priority," said Anne Sheehan, the pension funds director of corporate governance.
"The companys conglomerate structure, which has proven to be an ongoing impediment, must be eliminated. Separating (Timkens) two incongruent businesses is the right course for maximizing the potential of the steel and bearings businesses over the long term," Relational principal Ralph Whitworth said.
The vote in favor of the plan "overcomes a substantial inside ownership bloc of at least 17 percent and makes clear that such inside blocs can no longer be taken for granted as an effective deterrent to simply thwart meaningful shareholder activism," Whitworth added.
As of early January, the Timken family owned 10 percent of the companys shares, according to the annual meeting and proxy notice filed March 21. Others owning more than 5 percent of the company include Relational, with 6.9 percent of shares; participants in Timkens savings and pension plan, 6.4 percent; and BlackRock Inc., which holds 6.1 percent of common stock, according to the filing.
In other meeting news, shareholders also re-elected all 12 members of the Timken board of directors to one-year terms.