- Shareholders approved a non-binding proposal in May
- Management argues against the spin-off
- Investing +$500 million in steel plants
Some shareholders of The Timken Co. may get their wish: the industrial technology group’s directors have formed a committee to evaluate splitting the organization into independent firms, selling off the steelmaking operations.
Activist investors launched the proposal about eight months ago. At Timken’s annual meeting in May, shareholders approved a non-binding proposal to sell off the steel business. Approximately 47 percent of the outstanding shares endorsed the spinoff, and 41 percent opposed it. Of the shares voted, approximately 53 percent favored the proposal and 47 percent opposed it.
Now, the directors have agreed to evaluate a potential separation, and to review Timken’s corporate governance and capital allocation strategy.
Timken’s management has argued against the proposed spin-off, which was raised first by shareholders the California State Teachers' Retirement System and Relational Investors LLC. They argue that the company’s stock is undervalued as a result of its organizational strategy. Their view is that two separate, focused businesses would achieve a greater market value.
"The Timken board of directors takes its fiduciary responsibilities seriously and remains committed to driving shareholder value," stated chairman Ward J. Timken, Jr. "We appreciate the thoughtful feedback we've received from our shareholders on the spin-off proposal as well as their broader input on corporate governance and capital allocation.”
The Timken management has argued that the longtime business strategy has been well established and endorsed by the market. "The simple fact is that our integrated business model is working. The deep synergies between our Steel and Bearings & Power Transmission businesses provide us with a tremendous competitive advantage in the marketplace. This enables us to deliver value for our customers and for our shareholders," according to a letter delivered to shareholders in April.
“We are investing more than $500 million in our Ohio steel plants to help us better meet customer needs,” group president Rich Kyle explained in April. “It underscores our long-standing commitment to advance our capabilities and continue to provide Timken high-performance steel products for some of the world’s most-demanding applications.”