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Economy and Business

"Activist" investor wants to split the company
No thank you, says Timken management in prepared statement 

Tim Rudell
Groundbreaking for the $225-million expansion of Timken's steel making capacity at its Faircrest plant near Canton
Courtesy of TPR
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In The Region:

Break up the more than 100-year-old Timken Company:  that’s what some significant investors in the Canton-based bearing and steel maker are calling for.  WKSU’s Tim Rudell reports they say the move would make the stock of current shareholders more valuable.  

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Relational Investment is an “activist” investor:  the San Diego firm pushes companies it has a stake in to improve share value. It holds close to 6 % of Timken’s stock and has a proposal for the company’s next annual meeting: “Sell the steel division.” 

A third of Timken’s roughly $5-billion yearly revenue comes from steel, which it began producing in 1916 in Canton. It’s actually been headquartered there and Canton has been the home of the Timken family since 1901.  

Eli Lustgarten is a nationally published analyst with Longbow Research. “Relational Investors are known for being creative and suggesting intuitive changes.  But the idea of Timken splitting up the company into a bearing & transmission and steel business is actually not new and has been talked about for several years.”

And, Lustgarten says, because Timken’s precision-steel supplies both its own and other high-end manufacturing, spinning-off steel might not do what Relational thinks it would.  “Timken is not just a bearing company and a steel company.  It’s a motion solution company.  And its steel business is a specialty steel business.  So it’s nice that you get activists suggesting how to improve the stock price.  But, in this case, we think this is more of a short-term event, and not necessarily in the best interest of Timken shareholders.” 

Splitting-up one of northeast Ohio’s major international corporations would be huge news in the region; but Lustgartner says…“Odds are, because this is not a new concept that hasn’t been looked at, it will be just a recommendation.  So, I suspect not much will happen.  It’s not a business easily separated, nor makes a lot of sense to be separated.

In February of this year Timken announced plans to invest $225-million in its Faircrest steel mill in Canton so it can produce more specialized steel pipe and precision equipment for the shale drilling boom in Ohio.  The company is also building its new 42 million dollar headquarters near the Akron-Canton airport. 

Related WKSU Stories

Activist investors seek to split Timken
Wednesday, November 28, 2012

Northeast Ohio businesses making record profits
Wednesday, April 25, 2012

Analyst says Timken expansion a good choice
Wednesday, August 31, 2011

Commitment to Canton is long term
Monday, April 23, 2012

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