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Cooper Tire Shares Roll 30% Higher on $2.8B Buyout by Goodyear

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Cooper Tire & Rubber Co. shares raced to a new 52-week high after the company reported it entered into agreement to be acquired by Goodyear Tire & Rubber Co. in a combination cash and stock transaction valued at $2.8 billion.

Prior to the U.S. market open today, global tire manufacturer Cooper Tire & Rubber Co. (CTB:NYSE) announced that it entered into a definitive agreement to be acquired by The Goodyear Tire & Rubber Co. (GT:NASDAQ). The firms stated that the total enterprise value of the transaction is estimated to be approximately $2.5 billion.

The companies advised that the merger of the two businesses will serve to greatly expand Goodyear's product offerings by combining the portfolios of two highly complementary brands. Goodyear expects that by acquiring Cooper it will emerge with an even stronger position as a U.S.-based manufacturer with increased presence in distribution and retail channels including the highly profitable light truck and SUV product segments.

The report stated that under the terms of the transaction "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."

The companies advised that the transaction has already been approved by their respective Boards of Directors and is expected to close in H2/21, though the deal still remains subject to the approval of Cooper shareholders along with the satisfaction of customary closing conditions and required regulatory approvals. Subsequent to closing, the combined company will be headquartered in Akron, Ohio, although Goodyear anticipates that it will continue to maintain Cooper's existing large operations and presence in Findlay, Ohio.

Goodyear's Chairman, CEO and President Richard J. Kramer commented, "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."

Cooper Tires President and CEO Brad Hughes remarked, "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."

The firms outlined the strategic and financial benefits from the combined entity and stated that the merger strengthens Goodyear's leadership position in global tire industry and specifically will nearly double its presence in the Chinese market. The companies also noted that the two product brand lines are quite complementary which will being together Goodyear's strength in OEM and premium replacement tires with Cooper's strength in the light truck and SUV segments. The firms added that the combined operations will also benefit from significant, immediate and long-term financial synergies in both manufacturing and distribution.

In a separate news release today, Cooper Tire & Rubber Co. reported financial results for its fourth quarter and full-year ended December 31, 2020.

The company stated that for FY/20 it achieved net income of $143 million, or diluted earnings per share of $2.83, compared to net income of $96 million, or $1.91 diluted earnings per share during FY/19.

The firm indicated that net sales totaled $2.52 billion in FY/20, compared to $2.75 billion in FY/19 and stated that in FY/20 global unit volume decreased 13.0%, versus FY/19.

CEO Hughes stated, "In 2020, Cooper continued to build upon the positive momentum that began in 2019, driven by execution of our strategic initiatives, which have successfully transformed Cooper into a consumer-driven company...Despite impacts from coronavirus, we delivered strong operating profit performance for the year and demonstrated that the value proposition of providing high quality tires at an affordable price is compelling for consumers, especially in the current environment."

The company provide additional financial data for Q4/20 and FY/20, but stated that its primary focus in its earnings call will be centered upon the Goodyear acquisition and the path forward.

Goodyear is one of the world's largest tire companies. The company manufactures products in 21 countries worldwide and employs around 62,000 people globally.

Cooper Tire & Rubber is the fifth largest tire manufacturer in North America by revenue. The firm is owns several companies that specialize in designing, manufacturing and selling tires for autos, light and medium trucks, motorcycles and for motorsport racing. The company operates 10 manufacturing facilities around the world and employs roughly 10,000 employees in 15 countries.

Cooper Tire & Rubber started the day with a market cap of around $2.2 billion with approximately 50.37 million shares outstanding and a short interest of about 3.9%. CTB shares opened nearly 19% higher today at $51.97 (+$8.20, +18.73%) over Friday's $43.77 closing price and reached a new 52-week high this morning of $57.68. The stock has traded today between $51.48 and $57.68 per share and is currently trading at $57.17 (+$13.40, +30.61%).


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