Cooper Tire & Rubber Co.’s Chinese joint venture partner, the Chengshan Group Co., plans to exercise its right to purchase Cooper’s majority share in its Cooper Chengshan (Shandong) Tire Co. (CCT) plant. The tiremaker is currently reviewing the notice and documentation provided by Chengshan to confirm that all requirements under its option agreement have been met, it said.
In January, Cooper signed an agreement with Chengshan Group Co. and the CCT labor union with regard to the future of the CCT joint venture. Chengshan had until Oct. 10 to decide whether to buy out Cooper’s 65% state in the joint venture tire plant or sell its 35% to Cooper.
The plant had previously been valued at $440 million. Chengshan is required to pay Cooper an estimated $286 million for its shares of the joint venture tire plant.
“Delivery of the exercise notice is one of several steps necessary prior to any transaction,” said Roy Armes, Cooper chairman, CEO and president. “Cooper is committed to meeting the needs of our customers and continuing to grow in China. Should the process of resolving the ownership of CCT result in Chengshan acquiring our interest in the joint venture, a commercial offtake agreement is in place under which CCT is required to produce Cooper brand products – including Roadmaster truck tires – through mid-2018. The purpose of the offtake agreement is to assure a secure supply of Cooper brand products while also giving us the flexibility to enter into acquisitions, new offtake relationships, or possible greenfield development of additional production capacity anywhere around the world to support the continued expansion of our business.
“China is a core growth market for Cooper and we have a strong track record of success in the region. To support our strategic plans there, we expect to continue to invest in our sales and marketing organization, our rapidly growing distribution network, and the strong technology capability we have in place,” Armes stated. “In addition, we expect to continue to invest in our wholly-owned Cooper Kunshan Tire operation, which is a world-class tire production facility with room to expand. We look forward to final resolution of the ownership of CCT as we continue to pursue our global growth objectives.”
It was a lengthy labor disruption at the joint venture tire plant last year – effectively cutting production of Cooper, Mastercraft and Roadmaster tires destined for the North American market – that helped derail Apollo Tyres’ run at acquiring Cooper. The labor strife also impacted Cooper’s ability to pull together necessary financial information to make its third quarter and year-end 2013 financial reports on schedule.
A Chengshan executive told the Wall Street Journal that it decided to exercise its option to buy out Cooper because of the labor dispute. “There has been no trust between the two parties since the event last summer,” said the executive. “We are unable to continue our cooperation.”
Cooper purchased its shares of Chengshan in 2006.
