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Update: No New Deadline Set in Cooper-Chengshan Ownership Deal

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Cooper Tire_resizedGiven the relationship of the parties over the last 12 months, the announcement yesterday that Cooper Tire & Rubber Co. and Chengshan Group Co. need a little more time to sort out ownership of their joint venture plant could not be termed a surprise.

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Aug. 11 was the stated deadline the parties established back in January to sort out the future ownership of the Cooper Chengshan (Shandong) Tire Co. plant in Shandong province, China. It was a lengthy wildcat labor disruption at the facility last year – effectively cutting production of Cooper, Mastercraft and Roadmaster tires destined for the North American market – that helped derailed Apollo Tyres’ run at acquiring Cooper.

In January, after Cooper ended any deal with Apollo, the Findlay, Ohio-tiremaker signed a deal with Chengshan Group Co. and the CCT labor union to determine the future of the Cooper Chengshan Tire Co. plant.

Under the agreement, the CCT venture could be bought out by Chengshan, purchased by Cooper or continue the current ownership arrangement.

Chengshan owns 35% of CCT, while Cooper owns 65%. Under the pending agreement, a process to establish a fair market value of CCT through an independent evaluation was determined. Following the evaluation, Chengshan has the first option to buy Cooper’s share of CCT for $283 million, or more based on the evaluation. The company will also have the first option to sell its 35% shares to Cooper.

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Should Chengshan purchase Cooper’s stake in the joint venture, Cooper will continue to have off-take rights with CCT agreeing to produce Cooper brand products, including its truck and bus radial tires for a minimum of three years.

If Chengshan decides not to exercise either option after 45 days, Cooper will have the same amount of time to exercise its right to purchase Chengshan’s 35% interest for $152 million or more based on fair market value.

If neither party elects to purchase the others’ interest, the agreement allows for continuation of the joint venture as currently structured.

In announcing that it was extending the Aug. 11 for “a brief period,” Cooper chairman and CEO Roy Armes said, “The process to arrive at the long-term ownership of CCT is ongoing. Today was the deadline for the independent valuation firm to deliver its fair market valuation of CCT, which would have put in motion the put and call options specified by the January agreement. Cooper has briefly extended that deadline to allow for some additional work to take place related to the process. We will continue to communicate with investors and others at key points in this process as appropriate.”

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Cooper did not set a new date for completion of the valuation, or any other deadline related to the situation.

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