Sept. 18, 2013
Timken to Spin Off Steel Business
The Timken Company, Canton, Ohio, plans to spin off its steel business from its bearings and power transmission business, creating two separate public companies. Under the plan, the new engineered steel operation will run as an independent, publicly held company with estimated annual revenue of $1.7 billion. The bearings and power transmission business will continue to operate as The Timken Company with estimated annual revenue of $3.4 billion. The transaction should be completed within 12 months.
“We see this initiative—to build out two strong, focused companies—as further evidence of our commitment to drive value for our shareholders and our customers,” says James W. Griffith, president and CEO.
Griffith noted that the two stand-alone companies will continue to advance their distinct growth strategies within their respective core markets, which is expected to further improve competitiveness. “The bearings and steel businesses are well-run and well-positioned in their markets to perform well through economic cycles and have successfully implemented the Timken business model. We have talented, capable and dedicated employees whom we believe will drive these businesses to new levels of success as separate entities.”
The move to two separate companies was launched by shareholders in April, and was initially rejected by Timken’s leadership. A vote on the issue took place at the shareholders meeting in May, following which the board authorized an evaluation by a strategy committee comprised of independent directors. That committee determined the split was the proper decision.
“The strategy committee and board concluded that even with the company’s success in improving performance in recent years and an impressive track record of accomplishments, the company’s share price has not appropriately reflected our significant progress. With our shares trading at a discount to our peers, we recognized the need to examine opportunities to better drive value in the market,” says Joseph W. Ralston, the board’s lead independent director. “Through the course of our work, it became clear that creating two focused companies would allow investors to more fully appreciate and value the unique strategic and financial strengths of each business, including operating performance, margins, earnings and cash flow.”
Headquartered in Canton, the engineered steel company will employ about 3,000, operating seven manufacturing plants, four warehouses and five sales offices. It manufactures carbon, micro-alloy and alloy steels with an annual melt capacity of more than 1.8 million tons. The company claims its steel business is North America’s leading manufacturer of large SBQ bars for industrial markets and its largest producer of seamless mechanical tubing.