The Goodyear Tire & Rubber Company and Cooper Tire & Rubber Company have 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. The 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 segments.
The 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. 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 closing of the transaction, Goodyear shareholders will own approximately 84% of the combined company, and Cooper shareholders will own approximately 16%.
Founded 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. “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.” Kramer added: “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.”
Brad 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 Goodyear to Acquire Cooper, Creating Stronger U.S.-Based Leader in Global Tire Industry 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.”
Compelling Strategic and Financial Benefits
Strengthens leadership position in global tire industry. 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.
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. Together, these brands have the opportunity to deliver a more complete offering to aligned distributors and retailers.
Long-Term Financial Benefits & Synergies
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 a 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 transaction is immediately accretive to earnings per share, modestly improves Goodyear’s balance sheet position and enhances the company’s ability to delever.
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.
Timing, Approvals and Financing – The 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. Goodyear intends 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.
Focused on a Successful Integration
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. After closing, the combined company will be headquartered in Akron, Ohio, but Goodyear expects to maintain a presence in Findlay, Ohio.
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Goodyear announces leadership changes – Ryan Patterson to lead Cooper Tire Integration and Nathaniel Madarang to lead Goodyear Asia Pacific
Following the company’s recent announcement of its plans to acquire Cooper Tire, The Goodyear Tire & Rubber Company announced that Ryan Patterson, currently President of its Asia Pacific business unit, will lead the integration effort as Senior Vice President, Business Integration. Nathaniel Madarang, currently Managing Director of Goodyear China, will succeed Patterson as President of Goodyear Asia Pacific. “As one of Goodyear’s most senior leaders, Ryan Patterson has the depth and experience to lead the integration of our acquisition of Cooper Tire to maximise benefits for our shareholders, customers, consumers and associates,” said Richard J. Kramer, Chairman, CEO and President.
“Ryan is a market-back leader with broad, global perspective. From his leadership roles in Asia, North America and Latin America, he understands all aspects of our business end-to-end, including manufacturing, is deeply familiar with our customers and has served as the lead architect for some of Goodyear’s core go-to-market strategies,” he added. “It is also a testament to Ryan’s leadership in the Asia Pacific region that we have a strong successor for his current role in Nathaniel Madarang. Nathaniel is a customer-focused leader with deep knowledge of the Asia Pacific region and the tyre industry,” Kramer said.
“As the senior leader of our business in China, he has been instrumental in reshaping our distribution in this important market and in designing and launching Goodyear’s direct-to-retail business model. The China market remains a high priority for Goodyear, and Nathaniel is extremely well-positioned to drive growth there and throughout the region,” he added. Prior to his role in Asia Pacific, Patterson was President of Goodyear’s North America consumer business, where he developed the company’s consumer strategy and its focus on high-value segments. He led the creation and implementation of the company’s aligned distribution model in North America, and launched goodyear.com, driving e-commerce sales for distributors and dealers.
Prior to his work in North America, Patterson worked in several roles of increasing responsibility in Latin America since joining the company in 2002. He is a graduate of Brigham Young University, where he earned his bachelor’s degree in Accounting, and Harvard Business School, where he earned his MBA. Madarang has been with Goodyear since 2008. Prior to his role as Managing Director of Goodyear China, he was Vice President of Finance for Goodyear’s Asia Pacific business, and prior to that, Vice President of Goodyear’s China consumer business and Finance Director for Goodyear China. Prior to joining Goodyear, he served in several leadership roles for Procter & Gamble in China and ASEAN.