The Goodyear Tire & Rubber Company will acquire the Cooper Tire & Rubber Company in a transaction with a total enterprise value of approximately $2.5 billion.
The transaction will expand Goodyear’s product offering by combining two portfolios of complementary brands, Goodyear says, adding it will also create a stronger U.S.-based manufacturer with an increased presence in distribution and retail channels while combining both companies’ strengths in the light truck and SUV product segments.
The combined company will have approximately $17.5 billion in pro forma 2019 sales. Under the terms of the transaction, which has been approved by the boards of directors of both companies, Cooper shareholders will receive $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per Cooper share for a total equity value of approximately $2.8 billion. Upon closing of the transaction, Goodyear shareholders will own approximately 84% of the combined company, and Cooper shareholders will own approximately 16%.
Founded in 1914, Cooper is the fifth-largest tire manufacturer in North America by revenue with approximately 10,000 employees working in 15 countries worldwide, the companies say. Cooper products are manufactured in 10 facilities around the globe, including wholly-owned and joint venture plants. The company’s portfolio of brands includes Cooper, Mastercraft, Roadmaster and Mickey Thompson.
Goodyear says the combined company will offer tire products and a broad selection of services through Goodyear’s relationships with traditional and emerging original equipment manufacturers; autonomous driving system developers; new and established fleet operators; and other mobility platforms. Goodyear adds there will be opportunities for expansion of select Cooper facilities.
Goodyear says the transaction significantly grows its position in other North American markets. In China, the combination nearly doubles Goodyear’s presence and increases the number of relationships with local automakers, while creating broader distribution for Cooper replacement tires through Goodyear’s network of 2,500 branded retail stores.
Goodyear says it expects to achieve approximately $165 million in run-rate cost synergies within two years following the close of the transaction. The majority of the cost synergies will be related to overlapping corporate functions and realizing operating efficiencies. In addition, the combination is expected to generate net present value of $450 million or more by utilizing Goodyear’s available U.S. tax attributes. These tax attributes will reduce the company’s cash tax payments, positioning it to generate additional free cash flow. The expected cost synergies from this transaction do not include manufacturing-related savings. The transaction is immediately accretive to earnings per share, modestly improves Goodyear’s balance sheet position and enhances the company’s ability to deliver, the company says.
For more information, Goodyear President, CEO and Chairman Rich Kramer gives a statement here.
