Timken to spin off steel business, create two public companies

By Lisa Kerner

Charlotte, N.C., Sept. 6 - Timken Co. announced that its board of directors approved a plan to pursue a separation of the company's steel business from its bearings and power transmission business through a spin-off, creating two publicly traded companies.

The transaction is expected to be tax-free to shareholders and should be completed within 12 months, according to a company news release.

"Not all the details on the separation have been worked out, and we'll share more information with you as we progress through this process," chief financial officer Glenn A. Eisenberg said during a conference call on Friday.

"We're confident that we can complete the separation within the [next] 12 months. The timing of the transaction is dependent on numerous factors including the macroeconomic environment and credit and equity markets."

According to Eisenberg, both companies are expected to have strong balance sheets.

"Regarding capital allocation, until the companies are separated, we intend to continue to allocate capital through a balanced approach of investing in capital expenditures, share repurchases, dividends and acquisitions," he said.

"Our balance sheet is strong, and we have ample capacity to invest and redistribute capital to shareholders while staying within out targeted net debt to capital ratio of 30% to 35%."

Timken currently has an active share buyback program in place and has already purchased 1.8 million shares this year, and 5.7 million shares remain under the existing board-authorized 10 million share buy-back program.

In addition to remaining active in repurchasing shares, the company will continue to evaluate its dividend at regular quarterly intervals, according to president and chief executive officer Jim Griffith.

One-time separation costs are expected to total $125 million.

The new publicly traded engineered steel company would have estimated annual revenue of $1.7 billion, while Timken would have estimated annual revenue of $3.4 billion.

Based in Canton, Ohio, Timken develops, manufactures and sells products for friction management and power transmission.

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