On September 5, 2013, the Timken Company officially announced that they would be splitting their company into two separate entities. After the announcement, Timken stock rose 6.2% during after-market trading.
Timken manufactures steel, bearings and power transmissions. The company split will form a new steel company (no name announcement yet) which will continue to manufacture carbon and alloy steel. The Timken Company will retain the bearing and power transmissions business. Both companies will be independent, publicly-traded entities.
— WSJ MoneyBeat (@WSJMoneyBeat) September 6, 2013
Why the split?
There are two main reasons for the Timken split. For one, the company believes that operating two separate entities will allow for revenue growth due to focus and specialization. Based on 2012 segment sales, Timken predicts that the new steel company will produce estimated revenue of $1.7 billion annually and the bearings/transmission business will produce estimated revenue of $3.4 billion annually.
The second reason for the Timken split was pressure from the company's largest shareholder; an activist investor that was pushing Timken to split the business into two sectors. This investor manages pension funds and had the backing of the California State Teachers' Retirement System (CalSTRS) in regards to this split.
Timken to split bearings, steel operations into two separate companies http://t.co/9zYRCQGBht
— ohiodotcom (@ohiodotcom) September 5, 2013
After the two companies have split, the Timken Company will have 17,000 employees and the new steel company will have 3,000 employees. The Timken Company will focus on emerging markets and technologies and the steel company will focus on premium steel products such as carbon and micro-alloy steels. Currently, the Timken steel business is the largest SBQ large bar and seamless mechanical tubing manufacturer in North America.
[Timken Co. Steel Bars]
The company split will take approximately 12 months after which Timken President and CEO, James W. Griffith, will retire and be replaced by Richard G. Kyle. Ward J. Timken, Jr. will be named the new steel company's chairman and CEO.
Current Timken shareholders have been invited to a conference call to discuss the changes. A replay of the call will be available from 12:00 pm EST September 6, 2013 through September 20, 2013.
Listen to the timken company conference call to discuss its plan to separate its - live at 10:00 AM, ondemand after - http://t.co/mhqwo6hFdt
— EarningsCast (@earningscast) September 6, 2013
[Images via Timken Co.]