“Our sum-of-the-parts valuation suggests a $69 target price ($52 + $17). However, given the disparate nature of the assets and investors’ preference for pure plays, we believe that an above-average conglomerate discount is likely required to entice investors. Assuming a 20% discount to the sum-of-the-parts valuation yields a price target of $55/share. A case could be made for a narrowing of the conglomerate discount if the management signaled a potential separation.” 1“Our sum of the parts … suggests a valuation closer to $55, but we agree that the market is unlikely to properly reward either the steel or the bearing business for the secular improvements they have made as long as these businesses remain combined.” 2
Relational Investors LLC And CalSTRS Urge Timken’s Board To Take Action To Separate The Company’s Businesses To Unlock Shareholder Value
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