CHICAGO Timken Co. has
filed an updated investor presentation highlighting what it
calls "serious flaws" in an analysis behind a proposal that the
company spin off its steel business.
In an April 1 filing with the
U.S. Securities and Exchange Commission (SEC), Timken picked
apart shareholder Relational Investors LLCs analysis,
saying that it overvalued Timkens bearings business
against its peers and did not select its peer group in a fair
and balanced manner, and that "significant synergies would be
lost" in a spinoff.
Canton, Ohio-based Timken is
urging shareholders to vote against the proposal from
Relational Investors and the California State Teachers
Retirement System (
amm.com, March 14), arguing that its steel and
bearings businesses are integrated in ways that benefit each
other and that the boards plan to create long-term
shareholder value is working.
"Timken has (a) strong track
record of delivering shareholder value as a result of its
existing strategy. Timken Steel is one of the companys
highest (return on invested capital) businesses," and has
invested in improving the steel units cost structure and
profitability, according to the presentation. "We believe
Relationals break-up valuation analysis has serious
Timkens process, mobile,
aerospace and defense businesses have sourced 58 percent of
their steel needs from the steel division over the past five
years, the company said, while the steel business has supplied
guaranteed quality, shorter lead times, lower costs, faster
customization of specialty products, enhanced customer service
and on-time product delivery.
The steel divisions
expertise benefits the companys other businesses,
extending to competition, application engineering, research and
development, Timken said.
Should the steel business be
spun off, Timken said it would become the smallest competitor
among its peers, dwarfed by the likes of Steel Dynamics Inc.
and Allegheny Technologies Inc., among others. Such a position
might push Timken into a non-investment-grade credit rating,
which would drive up capital costs, leading to limited
liquidity and less financial flexibility, especially in taking
on large projects.
"We urge shareholders not to be
misled by (the California State Teachers Retirement
System) and Relational Investors and support the Timken
strategy," the company said.
The company has launched a
website, www.TimkenDrivesValue.com, to provide information to
shareholders on the boards recommendation to vote against
the spinoff proposal.
"It is shocking that Timken
would underestimate its shareholders intelligence by
using such erroneous analysis as justification to not unlock
value," Ralph Whitworth, founder and principal of Relational,
said in a statement April 1. "In our conversations with many of
Timkens largest shareholders, there is a consensus view
that the company should spin off the steel business."
shareholders' meeting is scheduled for May 7.