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Timken Co. (NYSE: TKR) has been in business for more than 100 years, making bearings and steel for a variety of industrial products. Now the company’s largest single shareholder, activist firm Relational Investors LLC, is urging the company to spin off its steel business into a separate company. Timken, which is still controlled by members of the Timken family, takes a dim view of this suggestion.

Relational, which owns 5.73% of Timken, believes that the company’s specialty steel business is cutting as much as 50% off the value of the company’s shares. The California state teacher’s retirement system (Calstrs), another major holder of Timken stock with about 1.4% of shares, has submitted a proposal to be voted on at the next general meeting recommending that Timken hire an investment bank to get on with selling the steel unit.

It’s no secret that steelmakers are struggling as demand has softened in China and virtually everywhere else. Timken’s specialty steel business is no exception. And it is the company’s second-largest division, trailing only the bearings products group in revenues.

A spin-off may make sense, but Timken doesn’t think so, based on its own review of the Relational proposal. The company had this to say in response:

As a market leader in high-quality engineered steel products, our Steel Business leverages the same expertise and know-how that we apply across our businesses. We have significant technology, cost and revenue synergies between our bearing and steel businesses as well as diversification benefits in continuing to operate under our current structure. These synergies and benefits, coupled with a potential reduction in financial flexibility, among other factors, led the Board to conclude that the separation of the businesses at this time would not be in the best interests of Timken shareholders.

In response, Relational’s Ralph Whitworth told Bloomberg:

The unquantified synergies that the company points to in defending the structure are far outweighed by the value that could be unlocked in separating the businesses. The diversification of the company is actually what is causing the discount of stock, which is severe. We think it is up to 50 percent.

Neither side has a really compelling argument for its position. Timken’s refusal to split up is surely holding down the share price, but is looking at a longer term horizon. And Relational’s point that shareholders expect more now certainly resonates with investors.

The Timken family has sole or shared voting power over 10.3% of the company’s shares, while Relational and Calstrs together control 6.15% of the stock.

Shares of Timken are down 4.7% at $44.08 in a 52-week range of $32.59 to $57.94.

Paul Ausick