Analyst Say Hold Following Cooper's CCT Deal - Tire Review Magazine

Analyst Say Hold Following Cooper’s CCT Deal

Market analysts at KeyBanc Capital Markets have issued a hold on Cooper Tire & Rubber Co. following its announcement that the company has reached a deal with CCT.

The hold is based on several factors:
•    The company is expected to post its second half financials in March, which Key “expect to fall below investor expectations.”
•    The future ownership is uncertain with many different variables that are outside Cooper’s control, “given investors’ dislike for uncertainty, it could weigh on the shares in the near term.”
•    If Cooper sells and no longer retains ownership of the plant, near-term disruptions to the tiremaker’s China growth strategy is a concern. Chengshan’s actions are unpredictable, and while the agreement might ensure future supply for Cooper’s customers, comfort levels with the commercial terms and reliability of sourcing is overshadowed by Chengshan’s and the CCT union’s actions the second half of 2013.
•    The value of the plant is not definite – “Given the fact that Chengshan sought a materially inflated valuation previously for its 35% interest, we would not rule out Chengshan attempting to get [Cooper] to overpay for the minority interest regardless of independent valuation input.”

Information courtesy of Anthony J. Deem Equity Research Associate – Automotive  KeyBanc Capital Markets Inc.

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