Timken Co's largest shareholder urged the diversified manufacturer to separate its steel and bearings businesses, and criticized its corporate governance.

"The company trades at a steep discount due to the widely divergent characteristics of its businesses and a separation of the steel business would fundamentally change the way the businesses are valued by the market," Relational Investors LLC said in a statement on Tuesday.

Relational has the support of minority shareholder California State Teachers Retirement System (CalSTRS) in its push for a split.

The two firms together own 7.31 percent of Timken.

Relational said Timken has a history of poor corporate governance, pointing to the executive chairman's $9 million compensation, among others.

"The board has consistently demonstrated its unwillingness to seriously consider strategies to increase shareholder value," it said.

Relational first reported its Timken stake in November, calling for a spinoff of the steel business.

Timken had said that separating its business "at that time would not be in the best interests of Timken shareholders".

The company's shares, which have gained nearly 40 percent since Relational reported its stake, rose 2 percent to $57.44 on Tuesday on the New York Stock Exchange.

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