AKRON — It may not be too much longer before the Cooper Tire & Rubber Co. becomes part of Goodyear.
The Federal Trade Commission (FTC) recently paved the way for Goodyear’s $2.5 billion cash-and-stock deal to acquire Cooper to close in the third quarter, if not sooner.
According to a May 13 Goodyear filing with the Securities and Exchange Commission, the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 — which establishes waiting periods before such acquisitions can be completed — expired May 10, essentially granting regulatory approval in the U.S.
The FTC classifies the expiration of the HSR Act as the last of five steps in the U.S. regulatory process, with the first potential outcome of the expiration of HSR as this: “Close the investigation and let the deal go forward unchallenged.”
The other two potential outcomes don’t appear to apply to the deal.
Factor this in with Goodyear’s confirmed pricing of its $1.45 billion senior notes (see story on Page 22), which are funding sources for the deal, and the Cooper acquisition looks ready to be finalized sooner rather than later.
Goodyear reported that it will pay 5% annual interest on $850 million in senior notes due in 2029 and 5.25% annual interest in another $600 million of senior notes due in 2031. The debt offering closed on May 18.
“The deal could close soon,” said James Picariello, equity research analyst at KeyBanc Capital Markets. “Certainly in the third quarter, but it strongly is looking likely it will be before then.”
Goodyear declined to comment on the latest developments.
Still to come is approval for the deal by the European Commission. The SEC filing, in fact, noted that the deal, announced on Feb. 22, “remains subject to certain regularly approvals and customary closing conditions.”
U.S. regulatory approval came three weeks after China became the first country to grant antitrust approval, announcing the ruling April 23 as part of a package of “undertakings” approved unconditionally by its antitrust agency.
The SEC filing also states that once the merger is complete, Cooper will become “as a wholly owned subsidiary of Goodyear.”
As part of the SEC filing, Goodyear listed consolidated statements of income from the company, had it been one entity in 2020. The combined pro forma net sales are listed at $14.8 billion, with Goodyear at $12.3 billion and Cooper at $2.5 billion.
The combined net loss would have been $1.4 billion.
In addition, the report states that a combined company in the first quarter of 2021 would have had nearly $4.2 billion in net sales, including $3.5 billion from Goodyear.
Goodyear ranks as the No. 3 tire maker in the world in terms of global sales, estimated by Tire Business at $13.7 billion in 2019. Cooper, meanwhile, ranks No. 13 with nearly $2.8 billion in sales.
Cooper acknowledged the deal could close quickly in one of its latest news releases. The Findlay-Ohio based tire maker said it will award a quarterly dividend of 10.5 cents per share on common stock, payable June 24 to stockholders of record at the close of business May 27, 2021.
Cooper officials said that should the deal close before May 27, the dividend would not be paid, acknowledging the deal “could close earlier, following and subject to receipt of required regulatory approvals and the satisfaction of customary closing conditions.”
Cooper’s stockholders overwhelmingly approved the deal on April 30.
As both sides remain silent on other details and each conducts business as usual, the integration process continues behind the scenes.
A combined Goodyear-Cooper company would operate more than 50 manufacturing facilities worldwide — Cooper has 10 manufacturing facilities, including three tire plants and a mixing/components factory in the U.S.
The revamped company would have roughly 200 million units of annual tire production capability.