Goodyear Announces acquisition of Cooper Tire

Goodyear announced that it had agreed to buy Cooper tires for about $2.8 billion to strengthen its position in the North American tire market, and its market share in China has almost doubled thanks to a recovery in new car sales in China.

Under the agreement, Cooper shareholders will receive $41.75 a share in cash and 0.907 shares of Goodyear shares, totaling about $54.36 a share, 24 per cent higher than Cooper's closing price on Feb. 19. The deal, which still needs to meet regulatory requirements and the consent of Cooper shareholders, is expected to be completed in the second half of 2021. Upon completion of the deal, Goodyear shareholders will own about 84 per cent of the combined company and Cooper shareholders will own about 16 per cent.

In terms of revenue, Cooper Tire, founded in 1914, is the fifth largest tire manufacturer in North America, with about 10,000 employees in 15 countries. Cooper has 10 plants around the world, including wholly-owned and joint venture plants.

Goodyear occupies a large share in the front and rear market of passenger car tires in North America. According to Tire Business, a subsidiary of Automotive News (Automotive News), the company has a 25 per cent share of the front tire market and 10.5 per cent of the passenger car rear market. Last year, Goodyear ranked third with revenue of $5.1 billion in North America.

Goodyear said the initial cost-effectiveness of the deal would come from a combination of company functions, research and development and procurement. The two companies will not initially cut manufacturing jobs or plants, but say the use of co-production systems will create opportunities. In addition, the combined company expects sales of about $17.5 billion in 2019.

James Picariello, an analyst at KeyBanc, a well-known investment bank on Wall Street, believes that the deal is a win-win situation and "a clear and great deal for both sides".

The tire industry is recovering from the epidemic. Last week, French tyre maker Michelin predicted that its business would return to pre-outbreak levels in the second half of 2022.