Goodyear sells Dunlop brand to Sumitomo for $701 million

AKRON—Goodyear has signed a long-anticipated agreement to sell the venerable Dunlop tire brand—which has roots back more than 130 years—to Sumitomo Rubber Industries Ltd. (SRI) for approximately $701 million in cash.

The Dunlop brand has been part of Goodyear's North American and European portfolio since 1999, when the company secured rights to the brand in those markets as part of the dissolution of its global alliance with SRI in 2015.

The sale includes trademarks and "intangible assets necessary for operations" of the Dunlop business in Europe, North America and Oceania for consumer, commercial and other specialty tires.

SRI already markets the Dunlop brand in other regions across the globe.

Once the deal closes, SRI will pay Goodyear $526 million for the Dunlop brand and certain associated intellectual property and another $105 million in a transition fee for support "in transitioning the brand and associated intellectual property, and facilitating the transition of Dunlop customers, to SRI, including planning matters and support of distribution and logistics."

In addition, SRI will purchase existing Dunlop consumer tire products "at an agreed markup." Goodyear said the exact inventory value to be sold will finalized between signing and closing, but the company said it estimates proceeds to be $70 million.

Under terms of a transition off-take agreement (TOA), Goodyear will supply certain Dunlop-branded tires to SRI in Europe for five years. The agreement stipulates minimum purchase quantities of 4.5 million tires per year for the term, on a take-or-pay basis.

SRI may end the TOA after the third year, with 12 months' notice, subject to termination fee. The TOA provides Goodyear with an agreed markup to total costs (including raw materials) for each tire sold.

The sale fulfills another aspect of the Goodyear Forward plan, which focuses on streamlining operations and finding cost efficiencies in order to make the tire maker more profitable.

Goodyear CEO and President Mark Stewart called the sale "another important milestone" in the implementation of the plan.

Goodyear sold its OTR (off-the-road) business unit to Yokohama in late July, 2024 as part of the Goodyear Forward strategy. Goodyear Forward also calls for divesting the firm's chemicals businesses.

"We are optimizing our portfolio and reducing leverage to drive sustainable and substantial shareholder value creation," Stewart said. "Not only does the transaction deliver significant value for our shareholders, it better positions Goodyear to enhance our focus on the growth of our core brands."

Under the terms of a Transition License Agreement (TLA), Goodyear will continue to manufacture, sell and distribute Dunlop consumer tires in Europe through at least Dec. 31, 2025, with the Akron-based tire maker paying a royalty to SRI during this period on Dunlop sales. Goodyear will retain all profit from those sales.

This agreement automatically will extend through Dec. 31, 2026, unless Goodyear and SRI agree to an earlier termination.

Goodyear said the transition period was intended to provide SRI more time to scale its organization in Europe to absorb the Dunlop brand and maintain service for existing Dunlop customers.

Goodyear said it will license back the Dunlop trademarks from SRI for commercial (truck) tires in Europe on a long-term basis, subject to a royalty on sales. Goodyear can terminate this agreement at any time during the licensing period.

According to Goodyear, Dunlop consumer tire sales were $532 million in 2023. Dunlop commercial tire sales totaled $201 million in the same period. Other specialty Dunlop tire sales (excluding motorcycle) totaled $22 million.

Goodyear will retain its Dunlop trademarks for its motorcycle tire businesses in Europe and Oceania.

Earlier this year, Goodyear repositioned the Dunlop brand as its "pan-European" value brand, positioned between the premium Goodyear and five "local hero brands," what Stewart called the upper part of Tier 2.

At the SEMA Show last November, Stewart told Tire Business that the company would not sell the Dunlop brand in a "bargain fire sale." Stewart revealed that his father had worked at Dunlop for 42 years.

"Our team conducted a comprehensive process focused on maximizing value for Goodyear through a divestment of our Dunlop Brand, and we are very pleased with the outcome achieved," Christina Zamarro, executive vice president and chief financial officer, said. "We are committed to working closely with SRI to ensure a smooth transition for customers of the Dunlop brand."

The transaction, subject to regulatory approvals, other customary closing conditions and consultations, is expected to close by mid-2025. Goodyear said it will use proceeds of the sale to reduce leverage and fund initiatives in connection with the Goodyear Forward transformation plan.

Goodyear said it does not expect the transaction "to materially impact segment operating income through the term of the TOA. After that, Goodyear said it expects to reduce segment operating income by approximately $65 million per year during the term of the TOA, before any other actions it may take to improve operating margin.

Goldman Sachs & Co. L.L.C. is acting as lead financial advisor, while Barclays Capital Inc. is acting as financial advisor and Cleary Gottlieb Steen & Hamilton L.L.P. is acting as legal advisor to Goodyear.