⚙️ Goodyear: Treading Boldly?
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⚙️ Goodyear: Treading Boldly?
Goodyear Tire & Rubber Co. (GT) has agreed to pay $2.8B to acquire rival Cooper Tire & Rubber Co. (CTB), in a deal that will combine the USA’s two biggest tire manufacturers.
Background: Goodyear started in 1898 by manufacturing all things rubber, from cycle tires, horseshoes to airplane tires. It grew to become the world’s third-largest tire company by sales. Over its 120-year history, the company has been there and done that - from partnering with Disney and NASCAR, all the way to helping NASA with tire design for the Moon and Mars rovers.
Goodyear’s acquisition of Cooper follows along the lines of prior acquisitions by the company - where it takes majority ownership (Poland’s TC Debica, Sava Tires & Turkey’s Goodyear Lastikleri are cases in point). Goodyear has also formed one of the largest tire distribution joint ventures in the United States, called TireHub, with Bridgestone, the first among equals in tire manufacturing.
What is happening?: The Cooper Tire deal is set for a total of $54.36 per share, which will be paid as a combination of 0.907 Goodyear shares and $41.75 in cash for a total of $2.8B. This price represents a 24% premium to Cooper’s closing stock price on Monday. After the transaction, Goodyear shareholders will own 84% of the combined entity, which will be headquartered in Ohio. The deal is seen as a win-win with Cooper shareholders getting a higher price per share and Goodyear strengthening its position in the US and China.
The combined company will have $17.5B in sales and will effectively double Goodyear’s presence in China. Goodyear expects to have cost rationalization of up to $165M once the deal consummates.
The automotive industry took a hit during the pandemic but is expected to rebound this year. It is anticipated the required regulatory approvals to complete the transaction will come through in the second half of 2021. Industry experts see the timing of this deal as especially positive, setting up the combined entity for the growth that will inevitably kick-in. Goodyear is adding a new set of wheels for a fierce race just in time.
Market Reaction: CTB ended the day at $56.64, up 29.4%; GT jumped 21.05% to end the day at $16.82.
Company Snapshot 📈
GT 16.82 USD +2.92 (21.05%)
Analyst Rating (10 Ratings) Buy 40% Hold 50% Sell 10%
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Later Today 🕒
Before Market Open: Crocs Inc Earnings (CROX)
Before Market Open: Home Depot Inc Earnings (HD)
After Market Close: Myriad Genetics Inc Earnings (MYGN)
After Market Close: Arena Pharmaceuticals Inc (ARNA)
8:30 PM IST: Consumer confidence index
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