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For Forum plans to address investor decisions relating to activist proposals for short term value realization, see the October 25, 2012 Forum report section on "Valuing Long Term Enterprise Success: a golden goose analysis" and the December 21, 2012 Forum Report: Candidates for an Activist “Golden Goose” Analysis.

 

The article below was distributed to Forum participants at 3:45pm on November 28, 2012 with the following observations:

In the example of a professional activist’s initiative reported below, note should be taken of how communications were managed by “a person familiar with the matter” to enable a 2:00pm posting of a well prepared article about a shareholder being “expected to divulge its stake and proposal … in a regulatory filing Wednesday.” (The filing was in fact reported by the SEC to have been filed about 6 minutes earlier, at 13:54:16.) It may be assumed from the following chart that news also reached some investors several minutes before the SEC filing. 

The article's reporter, Joann Lublin, has asked the Forum to note that the ticker report of her story's headline had in fact been published by the affiliated Dow Jones Newswires for its private subscribers at 1:42pm, the time of the trading surge and before the anticipated SEC filing:

*WSJ: Activist Fund Relational Takes Stake in Timken, to Argue for Breakup
--Source
(MORE TO FOLLOW) Dow Jones Newswires (212-416-2800)
11-28-12 1342ET

Also subsequent to the Forum distribution, Relational Investors LLC filed three SEC Form 13F-HR amendments reporting its previously undisclosed accumulations of the 5,495,247 shares of Timken Company stock (5.7% of the total outstanding) that Relational reported owning in that afternoon's SEC Form 13D filing, each with the explanatory heading "THIS FILING LISTS SECURITIES HOLDINGS REPORTED ON THE FORM 13F FILED FOR THE QUARTER ENDING [date of period] PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FOR WHICH CONFIDENTIAL TREATMENT HAS EXPIRED, IS NO LONGER WARRANTED, OR HAS BEEN DENIED." These were the newly disclosed holdings:

16:17:47 filing: 710,247 shares for the period ending March 31, 2012

16:19:45 filing: 1,420,247 shares for the period ending June 30, 2012

16:21:56 filing: 3,225,247 shares for the period ending September 30, 2012

At the end of the day, at 5:26pm, Timken responded with the following press release:

■  November 28, 2012, The Timken Company (as filed in an exhibit to an SEC Form 8K report): "Timken Comments on 13D Filing By CalSTRS and Relational Investors"

 

Source: Wall Street Journal, November 28, 2012 article

THE WALL STREET JOURNAL.

BUSINESS   |   November 28, 2012, 2:00 p.m. ET

Activist Fund Takes Stake in Timken, to Argue For Breakup

By JOANN S. LUBLIN

Activist fund Relational Investors LLC has amassed more than 6% of Timken Co. and wants to split the century-old maker of bearings and transmission parts into two publicly held companies, a person familiar with the matter said.

Relational is expected to divulge its stake and proposal to break up the Canton, Ohio, company in a regulatory filing Wednesday. The fund began accumulating the Timken holding last spring, this person said.

The move sets up a public standoff between an activist investor known to push for board seats and a family company with deep roots in Ohio. Representatives from Relational have met with Timken's executives and board members to argue that a breakup would lead to a higher share price, but the company didn't indicate it would move forward with the idea, the person said. Timken didn't immediately respond to requests for comment.

Timken's shares are up nearly 7% so far this year but have lost a quarter of their value since late April, when they were spurred higher by a strong first-quarter earnings report. The company had seen a strong run of profits thanks to higher prices, lower costs and acquisitions. But more recently, weak demand outside North America has weighed on sales.

Last month, the company lowered its forecast for revenue and earnings this year after reporting its third-quarter profit fell 27% amid a deeper-than-expected drop in sales.

Relational wants Timken to spin off its specialty steel business, which the fund believes is hurting the value of the company's shares, according to documents that are expected to be filed Wednesday. That would leave a company focused on the remaining bearings business, which accounted for about two-thirds of Timken's revenue in the first nine months of the year.

As part of the regulatory filing, Relational is expected to say it supports a shareholder resolution calling on the board to hire investment bankers to carry out a spinoff. The resolution has been submitted by the California State Teachers' Retirement System, a big public pension fund. If accepted by the company, shareholders would vote on the resolution at Timken's 2013 annual meeting.

"We're long term shareholders and want to be sure that the company is optimally configured to maximize value," said Anne Sheehan, the pension fund's director of corporate governance.

The expected regulatory filing also is expected to say Relational may seek seats on the company's board, the person familiar with the matter said.

Timken is one of several Midwestern companies to have built up a niche in making specific kinds of steel alloys for individual customers, ranging from car companies in Detroit to gas drillers in western Pennsylvania. Its expertise is just as much in chemistry as steelmaking. At a lab in its plant near Canton, Ohio, a large table of chemical elements hangs on the wall to help engineers cook up their specially designed recipes.

But analysts say there are concerns it may have overextended recently with projects such as a $225 million expansion kicked off this spring at its Canton-area plant. Much of that new production will be steel geared toward the drills, pipes and tubes needed for gas and oil drilling, a segment that analysts say risks oversupply as steelmakers across the U.S. ramp up capacity to cash in on the U.S. energy boom. Slumping gas prices have also hurt demand for energy-related steel goods.

Relational often argues that companies should be sold or broken up. It has also pushed for less dramatic changes, like cuts to what it sees as excessive executive compensation. It has influenced decisions at companies even when it holds a small stake. Last year, for instance, Hewlett-Packard Co. gave Relational co-founder Ralph Whitworth a board seat even though Relational only held about 1% of the technology giant. Timken had nearly 21,000 employees at the end of 2011.

—John W. Miller contributed to this article.

Copyright ©2012 Dow Jones & Company, Inc. All Rights Reserved

 

 

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