Goodyear’s $2.8bn Acquisition of Cooper Tires

By Christopher Shim, Joshua Ooi, and Rohan Shah (University of Cambridge), Kévin Insixiengmay, Martín Palomar, Olivier Baverez, Alexis Bernet, and André Assouline (HEC Paris)

 

Overview of the deal


Acquirer: Goodyear Tire & Rubber

Target: Cooper Tire & Rubber Company

Total Transaction Size: $2.8 billion

Closed date: 22/02/2021

Target advisor: Goldman Sachs

Acquirer advisor: Lazard, JP Morgan


Goodyear is to purchase Cooper Tire & Rubber Company for $2.8B, with the aim of strengthening its US presence through market-leading retail channels and supply chain management. The acquisition will improve Goodyear’s product offering for the light truck and SUV market segments. The acquirer expects ~$165M in run-rate cost synergies in addition to Goodyear’s tax attributes that will allow for the additional free cash flow for the third-largest tyre manufacturer by market share, after Bridgestone (Japan) and Michelin (France). The transaction is to be financed through a cash portion as well as a bridge financing facility from JP Morgan.


“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.” - Richard J. Kramer, CEO (Goodyear)

Company Details: (Acquirer - Goodyear)


Trading publicly since 1927 as GT, Goodyear is the third-largest tire manufacturer in the world and the largest in the United States. It provides tires and rubber-based equipment for the automotive and aeronautics sectors. In 2020, the Covid-19 pandemic negatively affected Goodyear’s sales volume, resulting in an estimated net income loss of $1.3B. Although the company is now back on the road to recovery thanks to the rebound in demand in the industry.


Founded in 1898, headquartered in Akron, Ohio (USA)

CEO: Richard J. Kramer

Number of employees: 64,000

Market Cap: $3.84B (as of 25/03/2021)

EV: $8.464B

LTM Revenue: $12.32B

LTM EBITDA: $660M

LTM EV/Revenue: 0.66x

LTM EV/EBITDA: 12.49x


Company Details: (Target - Cooper Tires)


Founded in 1914, the Copper Tire & Rubber Company designs, manufactures, markets, and sells replacement tires in North America, Latin America, Europe, and Asia. Its products include tire retread materials, as well as passenger car, light truck, truck and bus radial (TBR), motorcycle, and racing tires. The company’s customers include independent tire dealers, wholesale distributors, regional and national retail tire chains, and it even has three wholly-owned retail stores for direct sales to certain clients.