Timken to divide into two companies
In an effort to drive stock prices, Canton-based Timken Company will separate its steel business from its bearings and power transmission business, creating two publicly traded companies.
Under the plan spelled out in a Friday morning conference call to investors, the new engineered steel company will spin off into an independent publicly held company with estimated annual revenue of $1.7 billion. The bearings and power transmission, or B&PT business, will continue to operate as The Timken Company with annual revenue of about $3.4 billion.
The Niles Timken Plant, which employs about 40 workers, will remain under Timken’s B&PT business, but no details have been released about the future employment status of workers there.
Timken communications manager Dan Minnich said a project team is working with the board and senior management to determine organizational structure of the companies, particularly in areas where the two companies share resources. He could not say if the Niles plant would fall under that description.
“We expect the operation will create some new opportunities and at the same time likely require some adjustments or consolidations,” Minnich said.
He said there likely will be more indication of the effects of the separation on employment and operations by the end of the year.
In addition, Minnich said current wage and benefits will remain in place until the end of the year. After that, the new companies will determine that information.
The company transaction is expected to be tax-free to shareholders and should be complete in the next 12 months.
The decision came based on recommendations of a strategic committee and advisors that concluded the company’s share price was not reflecting improving performance and success, said Joseph W. Ralston, the board’s lead independent director.
“With our shares trading at a discount to our peers, we recognized the need to examine opportunities to better drive value in the market.”
James W. Griffith, president and chief executive officer, said the two stand-alone companies will continue to grow strategically.
“We have talented, capable and dedicated employees who we believe will drive these businesses to new levels of success as separate entities,” Griffith said.
The Niles plant, which services industrial operators and provides wear-resistant surfaces for mechanical power train components, will be one of 25 service and repair facilities operating as part of the new Timken Company B&PT footprint. Also part of the new company will be 35 manufacturing plants, four technology and engineering centers along with a network of sales offices, warehouses and distributors.
The company makes bearings and related mechanical power transmission components and services. It will employ nearly 17,000 associates. The headquarters will remain in Stark County.
Griffith, 59, will retire as president and CEO of The Timken Company after the separation is complete. The board plans to name Richard G. Kyle, 47, as The Timken Company’s new president and CEO. He joined the company in 2006.
The other company, which will focus on steel production, will include three Ohio steel making plants, three other U.S. value added production facilities, distributors in the U.S., Mexico and China and a global sales network.
It will be based in Canton, and have about 3,000 associates, seven manufacturing plants, four warehouses and five sales offices. The steel business is North America’s leading manufacturer of SBQ large bars for industrial markets and its largest producer of seamless mechanical tubing.
The board plans to name Ward J. “Tim” Timken Jr., 46, to lead the new engineered steel company as its chairman and chief executive officer.
“Plans call for both companies to be capitalized in a manner that provides the financial flexibility needed to pursue future growth opportunities,” Griffith said. At separation, both companies are expected to have strong balance sheets and their respective pension plans substantially fully funded.
At a later date, The Timken Company and the new stand-alone engineered steel company will name new separate boards of directors.