majors Goodyear Tire & Rubber Company and Cooper Tire & Rubber Company
announced that they have entered a definitive transaction agreement under which
Goodyear will acquire Cooper in a transaction with a total enterprise value of
approximately $2.5 billion.
acquisition deal comes almost eight years after the failed merger plans
announced by India based Apollo Tyres and Cooper Tire in 2013.
CLICK HERE TO READ: COOPER TIRE ENDS MERGER
DEAL WITH APOLLO TYRES
transaction will expand Goodyear’s product offering by combining two portfolios
of complementary brands. It will also create a stronger U.S.-based manufacturer
with increased presence in distribution and retail channels while combining
both companies’ strengths in the highly profitable light truck and SUV product
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.
on Goodyear’s closing stock price on February 19, 2021, the last trading day
prior to the announcement, the implied cash and stock consideration to be
received by Cooper shareholders is $54.36 per share, representing a premium of
24% to Cooper’s closing stock price on February 19, 2021, and a premium of 36%
to Cooper’s 30-day volume weighted average price as of the close on February
closing of the transaction, Goodyear shareholders will own approximately 84% of
and Cooper shareholders will own approximately 16%.
in 1914, Cooper is the 5th-largest tire manufacturer in North America by
revenue with approximately 10,000 employees working in 15 countries worldwide.
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.
is an exciting and transformational day for our companies,” said Richard J.
Kramer, Goodyear chairman, chief executive officer and president, adding that “The
addition of Cooper’s complementary tire product portfolio and highly capable
manufacturing assets, coupled with Goodyear’s technology and industry leading
distribution, provides the combined company with opportunities for improved
cost efficiency and a broader offering for both companies’ retailer networks.
We are confident this combination will enable us to provide enhanced service
for our customers and consumers while delivering value for shareholders.”
further stated, “We have a great deal of respect for Cooper’s team and share a
commitment to integrity, quality, agility and teamwork. We look forward to
welcoming Cooper to the Goodyear family.”
Hughes, Cooper president & chief executive officer, added, “Cooper has
transformed into a dynamic, consumer-driven organization that has balanced
traditional and emerging channels to increase demand for our products, while
updating and effectively leveraging our global manufacturing footprint. I am
extremely proud of what our team has accomplished over the past 107 years and
am grateful to our talented employees for their contributions and commitment.
This transaction marks the start of a new chapter for Cooper, which we are
entering from a position of strength. We believe that it represents an
attractive opportunity to maximize value for our shareholders, who will receive
a meaningful premium as well as the opportunity to participate in the upside of
the combined company. We look forward to the opportunity to combine Cooper’s
considerable talents with Goodyear’s, and to be part of a bigger, stronger
organization that will be competitively well-positioned to win in the global
Compelling Strategic and Financial Benefits
The transaction further strengthens Goodyear’s leading position
in the U.S., while significantly growing 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.
combined company will have the opportunity to leverage the strength of Goodyear
original equipment and premium replacement tires, along with the mid-tier power
of the Cooper brand, which has particular strength in the light truck and SUV
segments. Together, these brands have the opportunity to deliver a more
complete offering to aligned distributors and retailers.
Immediate and Long-Term Financial Benefits
Synergies and Tax Benefits. Goodyear 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.
Earnings and Balance Sheet. The transaction is immediately accretive to earnings
per share, modestly improves Goodyear’s balance sheet position and enhances the
company’s ability to deliver.
Opportunity to Create Additional Value from
Manufacturing and Distribution
Opportunities for expansion
of select Cooper facilities will increase capital efficiency and flexibility.
Additional revenue growth opportunities will result from the addition of the
Cooper brand to Goodyear’s global distribution network.
Increases Scale to
Support Investments in New Mobility and Fleet Solutions
As an industry leader in the U.S., 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.
transaction is subject to the satisfaction of customary closing conditions,
including receipt of required regulatory approvals and the approval of Cooper
shareholders. The transaction is expected to close in the second half of 2021.
intends to fund the cash portion of the transaction through debt financing and
has secured a
bridge financing facility led by JPMorgan Chase Bank, N.A. With complementary
business models, organizational structures and distribution channels, Goodyear
and Cooper expect to execute a successful integration that captures the full
benefits of the combination. The companies will prepare for integration focused
on continuity of manufacturing, operations and customer service.
closing, the combined company will be headquartered in Akron, Ohio, but
Goodyear expects to
a presence in Findlay, Ohio.
is serving as lead financial advisor, J.P. Morgan Securities LLC is serving as
financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP and
Covington and Burling LLP are serving as legal advisors to Goodyear. Goldman
Sachs & Co. LLC is serving as the exclusive financial advisor and Jones Day
is serving as legal advisor to Cooper.