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January 10, 2006 01:00 AM

Done deal: Goodyear takes over South Pacific Tyres

Mike McNulty
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    AKRON—Ansell Ltd.´s out. Goodyear´s in. And South Pacific Tyres Ltd.´s turnaround plan has been shifted into a higher gear.

    Goodyear will purchase the remaining 50-percent interest in joint venture South Pacific Tyres from partner Ansell Ltd. for about $40 million.

    The Akron-based firm also will repay about $50 million of outstanding loans from Ansell to South Pacific Tyres, the company said.

    The deal, which was announced Dec. 15 and is subject to government and other approvals, is expected to be completed in late January, Goodyear and Ansell spokesmen said. It will operate as a separate entity but be part of Goodyear´s Asia/Pacific operation.

    Ansell said it agreed to a purchase price slightly below South Pacific Tyres´ current carrying value in return for Goodyear assuming the company´s liability share under a previous put-and-call arrangement that covered tire warranty, workers´ compensation and the environment.

    The firm will use the majority of the proceeds from the sale and loan repayment for a share buyback of about $75 million during the next 12 months, the company said.

    South Pacific Tyres has operations in Australia—where it´s headquartered—and New Zealand, and the purchase will strengthen Goodyear´s position in both countries, said Pierre E. Cohade, president of the firm´s Asia/Pacific business unit.

    It enhances the tire maker´s flexibility and earnings growth in the region, he added.

    Ansell, a manufacturer of rubber latex gloves and condoms, has been looking to sell its share of the joint venture for some time.

    Cutting to the core

    "This is a significant milestone, as it marks the final sale of businesses from the Pacific Dunlop (Ltd.) era and the completion of Ansell Ltd.´s strategic transition into a focused global leader in the occupational, professional and consumer health care business," Ansell CEO Doug Tough said after the two parties reached agreement.

    Pacific Dunlop, a large industrial conglomerate, began downsizing in the early 2000s, sold off most of its businesses and in 2002 adopted the Ansell name held by its rubber latex gloves and condoms business. South Pacific Tyres was its last remaining non-core business.

    In its fiscal 2005 outlook, released last July, Ansell said it would write down the value of its share in South Pacific Tyres by nearly 60 percent to about $45 million, citing lower-than-expected second-half results and a less-than-rosy trading outlook.

    It blamed a poor half-year performance on continued competition from low-price imported tires and significant increases in raw material costs.

    Ansell, which has headquarters in both Melbourne, Australia, and Red Bank, N.J., then exercised a one-year option to compel Goodyear to buy its share of the venture, at a price based on an agreed-upon formula. It had until August 2006 to make that request.

    "We thought that by buying (South Pacific Tyres) this year we could accelerate the company´s turnaround," the Goodyear spokesman said.

    The company is applying the same strategies at the Australian tire operation it used to put Goodyear on a profitable path in North America, he said.

    Copeland takes reins

    Goodyear set the stage to turn South Pacific Tyres around when it named Joseph Copeland CEO of the business last May.

    Copeland had been Goodyear´s senior vice president of business development, strategy and restructuring. He has a solid background in taking a floundering business and returning it to the black, the spokesman said. Copeland played a key role in turning around Goodyear´s Chemical business during the two years he served as president of the unit.

    South Pacific Tyres had sales of $707 million and operating income of $17 million in 2004 "and we´re working to improve those results," the spokesman said. The tire manufacturer was formed in 1987 and currently employs about 4,000.

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