Responding to a non-binding referendum passed at Timken's (NYSE:TKR) annual shareholder meeting, the board of directors of the specialized alloy manufacturer announced Monday that it has begun the process of possibly spinning off its steel-making business.

The board said it has formed a special committee to evaluate a potential separation of its steel business as well as review its corporate governance and capital allocation strategy. The committee consists of all independent and non-Timken family board members and a report is expected by the end of the third quarter.

The referendum had been proposed by Relational Investors and the California State Teachers' Retirement System, shareholders which together own 7.3% of Timken's stock, and was supported by 53% of the shareholders casting their vote.

Timken Chairman Joseph W. Ralston said: "The committee, with the aid of outside advisors, is carefully evaluating options related to corporate structure as well as shareholder input on corporate governance and capital allocation. The company expects to report on the results of the Committee's evaluation by the end of the third quarter."

Timken had nearly $5 billion in revenues in 2012 of which the steel business represented 34% of the total, as well as a third of its operating profit. Timken has retained Goldman Sachs to assist in its evaluation.