By Soyoung Kim and Lynn Adler
Nov 28 Activist fund Relational Investors LLC
and a large public pension fund jointly reported a 6.15 percent
stake in Timken Co and said the diversified manufacturer
should split into two publicly traded companies.
Shares of Timken, which makes mechanical components and
high-performance steels, jumped 11.6 percent to $46.23 on the
New York Stock Exchange, valuing the company at more than $4.4
In a joint regulatory filing on Wednesday, Ralph Whitworth's
Relational Investors and the California State Teachers'
Retirement System said Timken should spin off its steel business
and hire investment bankers to evaluate their proposal.
The investors said they met with Timken management and board
members in August and told them the company is significantly
undervalued due to its combination of two different businesses
and separating those units would maximize shareholder value.
"Following the meeting, there is no evidence in the
company's public disclosures or otherwise that the company has
taken steps to independently evaluate the potential value
creation of a spin-off of the steel business," Relational and
CalSTRS said in the filing.
They said Timken's stock has potential to rise by more than
50 percent to $64.98 if the businesses were separated, which
would eliminate misunderstandings of the assets by investors who
specialize in the different sectors.
Timken, in a statement, said that separating its business
"at this time would not be in the best interests of Timken
Timken said it reviewed Relational's proposal this summer
with input from outside financial advisers.
"We have significant technology, cost and revenue synergies
between our bearing and steel businesses as well as
diversification benefits in continuing to operate under our
current structure," James W. Griffith, president and chief
executive of Timken, said in the statement.
Relational and CalSTRS said they intend to continue
discussions with Timken's management and board, and may seek
representation on Timken's board by nominating directors at a
Last month, Timken posted a lower quarterly profit and cut
its full-year forecast for the second time this year due to
weakness in its auto and energy markets.
Timken's steel segment represented 37 percent of the
company's total revenues and 34 percent of operating income in