Co.s board has agreed to split the companys steel
business and its bearings and power transmission business into
two publicly traded companies in a move pushed for by two
Under the plan, the
Canton, Ohio-based engineered steel bar producer will operate
as an independent publicly held company with an estimated
annual revenue of $1.7 billion, while the bearings and power
transmission business will continue to operate as Timken Co.
with an estimated annual revenue of $3.4 billion.
The California State
Teachers Retirement System (CalSTRS) and San Diego-based
Relational Investors LLC have been agitating for the spinoff
for the past year (
amm.com, Feb. 19).
"We see this
initiativeto build out two strong, focused
companiesas further evidence of our commitment to drive
value for our shareholders and our customers," Timken president
and chief executive officer James W. Griffith said in a
statement Sept. 5. "The bearings and steel businesses are
well-run and well-positioned in their markets to perform well
through economic cycles and have successfully implemented the
Timken business model. We have talented, capable and dedicated
employees who we believe will drive these businesses to new
levels of success as separate entities."
decision to split Timken into two companies, which is expected
to be completed within 12 months, came following a strategy
committee evaluation by independent directors established by
the board in response to a nonbinding shareholder vote to spin
off the companys steel business (
amm.com, June 11).
With the help of
financial and strategic advisors, the strategy committee
evaluated the financial and operational implications of
separating the two businesses, along with potential changes to
the companys corporate governance and capital allocation
director Joseph W. Ralston said the committee and board
concluded that Timkens share price had not appropriately
reflected its performance. "With our shares trading at a
discount to our peers, we recognized the need to examine
opportunities to better drive value in the market," Ralston
Creating two focused
companies should allow investors to benefit from operating
performance, margins, earnings and cash flow more readily,
"These are two winning
businesses and we are confident that both can sustain the
market-leading performance they have achieved over the past few
years," board chairman Ward J. "Tim" Timken Jr. said.
CalSTRS and Relational Investors welcomed the Timken
We fully support Timkens decision because it means
theyve listened to their shareholders, Anne
Sheehan, director of corporate governance at CalSTRS, said in a
statement. We firmly believe this action will create
long-term benefit for shareholders.
Relational cofounder Ralph Whitworth said the division of the
two businesses will contribute to the long-term vitality
and competitiveness of each. Its the right
answer for all constituents.