The Timken Company, via PR NewswireA finishing line at a Timken steel plant in Ohio. The steel business will be separated from the company’s industrial bearings operations.Activist investors scored another victory on Thursday when the board of the Timken Company agreed to spin off its steel business from its industrial bearings operations amid pressure from two big shareholders.
Timken’s decision came after a nonbinding vote by investors this summer supporting such a move. The proposal was led by the California State Teachers’ Retirement System and Relational Investors, the hedge fund led by Ralph V. Whitworth. Timken, a 114-year-old company, said at its annual meeting that it would consider the matter.
While Timken had argued that the company was better off staying together, the two dissident investors said that a division would create more value for their fellow shareholders.
Activists have taken on a number of big targets this year and claimed victory, including at Apple, Microsoft and the Hess Corporation.
Under the terms of its proposed split, which is expected to be completed within 12 months, Timken will spin off its engineered steel arm to create a new publicly traded company with about $1.7 billion in annual sales. The remaining business will retain the Timken name and have estimated annual revenue of about $3.4 billion.
James W. Griffith, Timken’s chief executive, will retire once the spinoff is finished. He will be succeeded at Timken by Richard G. Kyle, who is group president. John M. Timken Jr. will become nonexecutive chairman.
Ward J. Timken Jr., the current chairman, will take over as the chief executive of the steel company.
Both Calstrs and Relational said that they supported the split.
“We fully support and commend Timken’s decision announced today because it means they’ve listened to their shareholders,” Anne Sheehan, Calstrs’s director of corporate governance, said in a statement. “In particular, we are grateful to the special strategy committee for its diligent work and to the entire Timken board for responding to the will and long-term interests that Timken’s shareholders expressed at the annual meeting. We firmly believe this action will create long-term benefit for the shareholders.”