By Soyoung Kim
NEW YORK Feb 19 Investment firm Relational
Investors LLC has strong shareholder support for its campaign to
break up Timken Co and will continue to press its case
until the company splits into two publicly traded companies,
Relational founder Ralph Whitworth said on Tuesday.
Relational, which has teamed up with a large public pension
fund to push for a breakup of Timken, has heard from other
investors supporting its campaign and believes that an
"overwhelming majority" of Timken's public shareholders want a
separation of the company, Whitworth said.
Relational is Timken's largest shareholder, and together
with the California State Teachers' Retirement System (CalSTRS),
owns a 7.31 percent stake in the company.
In November, Relational and CalSTRS said that the
diversified manufacturer should split its steel and bearings
businesses to increase shareholder value. Timken has said it had
considered the proposal with outside advisers but determined the
time is not right for such a move.
"It appears they're hoping that if they just ignore it, it
will go away. But this is not going away because we're going to
persist until they maximize the value of these assets," the
investor told Reuters in an interview.
The investors sent a letter to the company's board earlier
on Tuesday. They have said Timken is significantly undervalued
due to its combination of two different businesses and
separating those units would maximize shareholder value.
"We continue to believe the company has significant cost,
technology and revenue synergies between its bearing and steel
businesses, as well as diversification benefits in continuing to
operate under its current structure," Timken spokesman Dan
Minnich said in a statement.
Shares of Timken, which makes mechanical components and
high-performance steels, rose 2.2 percent to $57.49 on the New
York Stock Exchange on Tuesday, valuing the company at more than
$5.4 billion. Timken's stock has rallied nearly 40 percent since
Relational and CalSTRS first disclosed their stake in November.
The investors believe the stock could rise to as much as $69
per share if the businesses were separated, which would
eliminate misunderstandings of the assets by investors who
specialize in the different sectors.
Timken has argued to the contrary, saying the loss of
diversification benefits would largely offset any near-term
valuation gain that might result from a separation of the
Timken's second and third-largest shareholders collectively
own a 10.8 percent stake and are both affiliated with the
company or its founding family, possibly making the activist
campaign a challenge.
But the investors have enough shareholder support outside of
the family to allow them to ultimately prevail, Whitworth said.
"We have had incoming calls into us, encouraging us and
urging us to move forward and expressing support. Now we'll
proactively go out and reach out to the shareholder base," he
said. "We are confident that an overwhelming majority of public
shareholders want a separation of the company and will support
Several diversified conglomerates have decided to break up
in recent years to focus on core businesses and streamline
operations, often under pressure from activist investors.
Whitworth pressured industrial conglomerate ITT Corp
to split up its defense and water purifying businesses. Other
companies that have pursued break-ups or major divestitures
include Tyco International, Kraft Foods Inc and