Tags: Timken | Spin | Steel | Relational

Timken to Spin Off Steel Unit, Bowing to Relational Pressure

Thursday, 05 Sep 2013 08:26 PM

Timken Co. agreed to spin off its steel business amid demands from Ralph Whitworth’s Relational Investors LLC that prompted a shareholder vote and a Goldman Sachs Group Inc.-led review that favored the split.

Ward Timken will serve as chairman and chief executive officer of the new publicly traded steel company, according to a statement Thursday. Richard Kyle will become president and CEO of the global bearings and power transmission company, which will operate under the Timken name.

The decision is a victory for Relational and the California State Teachers’ Retirement System, which had been pushing since November to spin off the steel unit to boost shareholder value. The proposal to divide the businesses won support of 53 percent of shareholder votes cast in May and a strategic review led by Goldman Sachs.

“With our shares trading at a discount to our peers, we recognized the need to examine opportunities to better drive value in the market,” Joseph W. Ralston, the lead independent director for Timken’s board, said in the statement. “It became clear that creating two focused companies would allow investors to more fully appreciate and value” the two businesses.

Shares Jump

Timken, which became a publicly traded company in 1922, rose 5.9 percent to $63.80 at 4:32 p.m. in extended trading in New York. The shares of Canton, Ohio-based Timken advanced 26 percent this year.

Relational, which takes stakes in companies that it considers undervalued and then lobbies for changes, said in May that the shares could rise an additional 20 percent to 25 percent under the spinoff plan. San Diego-based Relational held 7.9 percent of Timken as of Aug. 2, making it the largest shareholder.

One-time transaction costs for the spinoff are expected to be about $125 million, Timken said. The new steel company will have $1.7 billion in annual revenue while the bearing business will have $3.4 billion, according to the statement.

Timken had sought to keep the steel business, which traces its roots to World War I and generated about a third of last year’s $4.99 billion in revenue. Sales in the unit fell 29 percent in the second quarter from a year ago, due to lower demand in the oil and gas and industrial markets, Chief Financial Officer Glenn Eisenberg said on a July 25 conference call.

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Timken Co. agreed to spin off its steel business amid demands from Ralph Whitworth's Relational Investors LLC that prompted a shareholder vote and a Goldman Sachs Group Inc.-led review that favored the split.
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2013-26-05
Thursday, 05 Sep 2013 08:26 PM
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