Mr. Ward J. Timken, Jr.Chairman of the BoardTimken Corporation1835 Dueber Ave. S.W.Canton, OH 44706
Dear Mr. Timken:
As you know from our meetings with management and representatives of the Board on May 18 and August 23, 2012, respectively, we believe that Timken’s shares are trading at a substantial discount to its peers’, even after the recent share price appreciation. As we shared with you, our analysis clearly identifies that this discount results, in large part, from Timken’s integrated structure which combines two incongruent core businesses - Steel and Bearings.
Moreover, we have shown both the Board and management through our analysis that separating the Steel business segment (“Steel Business”) from the remaining business segments (collectively, “Bearings Business”) would unlock significant shareholder value and enable these businesses to perform optimally over the long-term, maximizing the benefits for all their constituencies.
In addition, numerous third-party analyst reports have been published reinforcing our message, that the separation of these businesses should achieve enhanced value for Timken shareholders. We want to ensure that, as fiduciaries for all shareholders, the Board has access to the more recent of these third-party investment community reports examining the important strategic opportunity for Timken to unlock shareholder value through a separation of the Steel and Bearings businesses. Accordingly, we have sent a copy of this letter to each of the Company’s directors.
As summarized below, the analyst community, through its own independent, objective analyses, has also reached a consensus that a spin-off of the Steel Business will maximize shareholder value. Furthermore, since filing our Schedule 13D on November 28, 2012, we have received phone calls from the investment community that have increased our confidence that shareholders of Timken want and would support a spin-off. Given these facts, we urge the Board to read both the excerpts from the analyst reports below as well as the full reports themselves, a list of which is attached: