Goodyear Tire & Rubber Co (GT) Buying Cooper Tire (CTB) For $2.8 Billion

By Amit Chowdhry ● February 22, 2021
  • The Goodyear Tire & Rubber Company (Nasdaq: GT) and Cooper Tire & Rubber Company (NYSE: CTB) announced that they have entered a definitive transaction agreement under which Goodyear will acquire Cooper. These are the details.

Today The Goodyear Tire & Rubber Company (Nasdaq: GT) and Cooper Tire & Rubber Company (NYSE: CTB) announced that they have entered a definitive transaction agreement under which Goodyear will acquire Cooper in a deal with a total enterprise value of about $2.5 billion. And the transaction will expand Goodyear’s product offering by combining two portfolios of complementary brands. Plus 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 highly profitable light truck and SUV product segments. The combined company will have about $17.5 billion in pro forma 2019 sales.

Under the terms of the deal — 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. And based 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 19, 2021. 

Upon the closing of the deal, Goodyear shareholders will own approximately 84% of the combined company, and Cooper shareholders will own approximately 16%.

Launched back in 1914, Cooper is the 5th-largest tire manufacturer in North America by revenue with approximately 10,000 employees working in 15 countries worldwide. And Cooper products are manufactured in 10 facilities around the globe, including wholly-owned and joint venture plants. The company’s brands include Cooper, Mastercraft, Roadmaster, and Mickey Thompson.

The deal 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. And the 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. These brands have the opportunity to deliver a more complete offering to aligned distributors and retailers.

Goodyear is expecting to achieve approximately $165 million in run-rate cost synergies within two years following the close of the transaction. And the majority of the cost synergies will be related to overlapping corporate functions and realizing operating efficiencies. Plus 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 deal is immediately accretive to earnings per share, modestly improves Goodyear’s balance sheet position and enhances the company’s ability to de-lever. And the opportunities for expansion of select Cooper facilities will increase capital efficiency and flexibility. Additional revenue growth opportunities are going to result from the addition of the Cooper brand to Goodyear’s global distribution network.

As an industry leader in the U.S., the combined company is going to 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.

The deal 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.

Goodyear plans to fund the cash portion of the transaction through debt financing and has secured a committed bridge financing facility led by JPMorgan Chase Bank, N.A. And after closing, the combined company will be headquartered in Akron, Ohio, but Goodyear expects to maintain a presence in Findlay, Ohio.

KEY QUOTES:

“This is an exciting and transformational day for our companies. 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.”

“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.”

— Richard J. Kramer, Goodyear chairman, chief executive officer and president

“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 tire industry.”

— Brad Hughes, Cooper president & chief executive officer