Down Doobie-Do Down Down, Breaking Up Is Hard to Do. Activist Fund Urges Break Up of Ball Bearings and Steel Company, Timken


Activist Investor Relational Investors, LLC and California Teachers Pension Fund CalSTRS Push For Spin-Off of The Timken Company’s Steel Business

Relational Investors and CalSTRS filed a 13D for The Timken Company (TKR). They think Timken is undervalued because of the combination of two incongruent, core businesses. They would like to see a spin-off of the steel business segment from its ball bearing business, and in August 2012, Relational met with Timken management and board members to recommend the spin-off.

Following the meeting, Relational said that there is no evidence that Timken has done anything evaluate the potential value creation of a spin-off. Relational said that separating the two businesses would maximize shareholder value partly because the steel business would be valued and classified as a “materials” company and the bearings business as an “industrial” company, with divergent operating and financial characteristics that are values separately by investors.

Relational and CalSTRS have vowed to the heavens to closely monitor Timken’s performance, business mix and strategic direction and may modify their plans if Timken doesn’t play their games. In addition, they may tattle to their representatives and advisers may communicate with other shareholders, industry participants and other interested parties (whoever that may be) concerning Timken.

That said, Relational is a serious activist investor with a good track record of delivering value to shareholders. Other reports state that up to $1.3 billion in market value is lost without a spin-off.

Timken has some cushion against activist shareholders since the Timken family owns over 10% of the company and the company’s pension plan owns another 5.4%. BlackRock owns another 5.1%, and we are not aware of their relationship with the Timken family, if any. Regardless, $1.3 billion in value is hard to ignore, so we’ll put this one in the Opps Tracker.

SEO bait Neil Sedaka on investor activism, “Breaking Up Is Hard To Do”:

Timken Schedule 13D

This entry was posted in Activist Investor, Opps, Relational Investors, Spinoff and tagged , , , , , , , , , , . Bookmark the permalink.

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