By Nadia Damouni and A. Ananthalakshmi
NEW YORK/BANGALORE April 1 Investment firm
Relational Investors LLC and a large public pension fund expect
to meet with representatives of Timken Co on Tuesday, a
source close to the matter said, despite the diversified
manufacturer's reluctance to split its businesses.
Earlier Monday, Canton, Ohio-based Timken Co
reiterated that it will not split its steel and bearings
businesses despite pressure from its top shareholder, and said
the investor's analysis of benefits from a break-up had serious
Activist fund Relational Investors LLC and California State
Teachers' Retirement System jointly reported a 6.15 percent
stake in Timken in November and said Timken should split into
two publicly traded companies.
As of March 21, the investors own a combined 7.28 percent of
Timken said it has reviewed a separation of the company
along with its external advisers, and concluded that
"maintaining (Timken) in its current integrated state is in the
best interests of shareholders at this time."
The investors had said Timken would be worth $68.36 per
share on a sum-of-the-parts basis upon separation, according to
a regulatory filing. Timken shares closed at $55.69 on Monday.
"It's unfortunate that Timken management continues to talk
down their own stock. As we demonstrated in our analysis, the
stock has outperformed its peers by 15 to 20 percent since our
initial announcement in November and is up 40 plus percent
overall," Relational founder Ralph Whitworth said in a telephone
interview on Monday.
"... there is still another 25 to 30 percent up if Timken's
board would only act on this straight forward initiative."
Timken said in the regulatory filing that Relational's
analysis does not include the over $200 million in one-time
transaction charges, and $60 to $80 million in lost annual
synergies. But the investor argued on Monday that its
presentation does include the transaction costs and that
Timken's assertion is incorrect.
Meanwhile, Timkin said its steel business, if spun off,
would have limited liquidity and not enough financial
flexibility to undertake big projects.
Timken called the shareholders' attempts as misguided in
their attempt to create "illusory short-term gains through the
spin off of the steel business."
During the meeting on Tuesday, the source said Relational
and CalSTRS will address Timken's "murky" analysis directly.
Timken has asked its shareholders to vote against their
proposal in the shareholder meeting on May 7.