The leading tire maker in the U.S. and third largest globally, Goodyear Tire & Rubber Company, has entered a definitive transaction agreement to acquire Cooper Tire & Rubber Company, the fifth largest, for a total enterprise value of approximately $2.5 billion. Goodyear and Cooper has a combined $17.5 billion in pro forma sales in 2019.
"This is an exciting and transformational day for our companies," said Richard J. Kramer, Goodyear chairman, chief executive officer and president. "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,” he added. We look forward to welcoming Cooper to the Goodyear family."
Both tire manufacturers are based in Ohio, with Goodyear in Akron and Cooper a two-hour's drive west in Findlay. This is something of homecoming, as Cooper was founded in Akron in 1914. The combination of portfolios and complementary brands are expected “to 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 segments,” according to the announcement. For example, Cooper replacement tires will now be available in Goodyear’s 2,500 retail stores.
Due to Cooper’s Asian presence, the move will also double Goodyear's presence in China. Cooper’s portfolio includes Cooper, Mastercraft, Roadmaster and Mickey Thompson.
After two years, Goodyear projects it will achieve approximately $165 million in run-rate cost synergie. This will come from eliminating overlapping corporate functions and realizing operating efficiencies. Utilizing Goodyear's available U.S. tax attributes should also generate net present value of $450 million and free up cash flow.
Both companies’ Boards of Directors have approved the deal’s terms, with Cooper shareholders receiving $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. The deal should be finalized in the second half of 2021.
Upon closing of the transaction, Goodyear shareholders will own approximately 84% of the combined company, and Cooper shareholders will own approximately 16%.
"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,” said Brad Hughes, Cooper president and CEO. “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."
