Goodyear Tire & Rubber Co. agreed to buy Cooper Tire & Rubber Co. for about $2.8 billion, strengthening its position in the North American tire market and almost doubling its presence in China, where auto sales are surging again.
Cooper shareholders will receive $41.75 a share in cash and 0.907 shares of Goodyear, or about $54.36 a share in total, according to a statement Monday. That’s 24 percent above Cooper’s closing price as of Feb. 19.
With Cooper, founded in 1914, Goodyear gains the fifth-largest tire manufacturer in North America by revenue, with about 10,000 employees worldwide. In China, Akron, Ohio-based Goodyear will gain better access to local manufacturers and create broader distribution for Cooper replacement tires.
Goodyear ranks third in North American tire sales by revenue, generating $5.1 billion in revenue last year. Cooper posted North American tire sales of nearly $2.1 billion.
Goodyear holds the top market share in North American original-equipment and replacement tires for passenger vehicles. It holds a 25 percent market share in factory installed tires and a 10.5 percent share of passenger vehicle replacement tire sales, according to figures compiled by Tire Business, an affiliate of Automotive News.
The initial cost benefits of the deal will come from combining corporate functions, R&D and procurement, Goodyear said. And while no manufacturing jobs or plants are being eliminated initially, the companies said they see opportunities to leverage their combined production system.
“As we develop business plans, we’ll start to take a look at what opportunities, including revenue growth and including how to better leverage the combined manufacturing footprint, we might be able to get,” Goodyear CEO Richard Kramer said on a call with analysts Monday. “We definitely feel like those opportunities are going to be there.”
Goodyear Tire’s purchase is a win for both companies, KeyBanc analyst James Picariello wrote in a note. Picariello said the deal “represents the rare instance of a clear, great deal for both parties.”
The tire industry is recovering from the pandemic slump. Last week French tire maker Michelin predicted business will return to pre-pandemic levels in the second half of 2022, with CEO Florent Menegaux saying the company needs to rebuild inventories after demand snapped back more strongly than expected late last year.
Goodyear shareholders will own about 84 percent of the combined tire company. It anticipates savings of about $165 million over two years from the merger.
The deal, which must meet certain regulatory requirements and must be approved by Cooper shareholders, is expected to close in the second half of 2021, the companies said in the joint press release.
Tire Business and Automotive News contributed to this story.