FINDLAY, Ohio—Cooper Tire & Rubber Co. has closed the sale of its 65 percent ownership in Cooper Chengshan Tire Co. Ltd. to Chengshan Group Co. Ltd. for about $262 million net of taxes and including dividends in accordance with the previously announced option agreement.
The firm said it will file pro forma financial statements in conjunction with a Form 8-K related to the transaction with the U.S. Securities and Exchange Commission.
Cooper's third quarter 10-Q filing with the Securities and Exchange Commission listed the valuation of CCT, determined by an independent firm, at about $437.7 million.
“Resolving the ownership of CCT has been a key goal for us and we are pleased to have it completed as we continue to execute our long-term growth plans for China,” Roy Armes, Cooper chairman, CEO and president, said in a statement.
Armes said with the closing, offtake agreements go into effect. CCT will continue to produce Cooper-branded products—including Roadmaster tires—through mid-2018.
“The purpose of the offtake agreements is to provide a secure source of product while also allowing Cooper the flexibility to continue to identify and develop alternative sources for these tires,” the executive said.
Cooper's options could include an agreement with another supplier, a joint venture, an acquisition, adding capacity to its other facilities, buying a facility and running it, or building a new plant. Armes said the firm has the financial capacity to take any or a combination of those paths.
When the firm released its third quarter financials, Brad Hughes—senior vice president, chief financial officer and treasurer, and president of Cooper's international operations—said that if Cooper sells its interest in CCT, the firm would continue to earn the profits on CCT-produced units that it sells through other Cooper business units, citing Roadmaster tires sold through Cooper U.S. as an example.
However, Cooper would lose the profits that CCT earns on selling tires to other Cooper business units and on any tire sold directly to the customer by CCT, Hughes said.
The firm at that time had not determined what it would do with the proceeds from the CCT sale.
Cooper plans to host a webcast Dec. 4 to discuss the CCT transaction, the recently announced preliminary countervailing duties on certain passenger and light truck tires imported into the U.S. from China, and the potential financial and business implications of these matters.