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
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
The affirmative vote is a first
step in the possible spinoff process, according to CalSTRS and
"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
In other meeting news, shareholders also re-elected all 12
members of the Timken board of directors to one-year terms.