Goodyear Shares Rise as Sale of Division Draws Closer

Goodyear Tire & Rubber Co. shares rose more than 6 per cent on March 19 following a ratings upgrade stemming from the anticipated announcement that the company will sell its engineered products division. According to KeyBanc Capital Markets analyst Saul Ludwig, the sale of the division could be announced in April. “Industry contacts tell us that a deal could be announced within the next 30 days and the selling price could top the $1 billion that is widely expected,” he reported.

Ludwig raised his rating on the US tyre major to “buy” from “hold,” citing the possibility of the sale of this unit plus that of Goodyear’s global off-road, aircraft, or international farm tyre businesses, as well as plant closures in Europe, Asia and South Africa, other cost cuts and an equity offering of at least US$1 billion.

J.P. Morgan analyst Himanshu Patel said in a note on March 16 that Goodyear appeared to be in the “latter stages” of completing an engineered products sale and J.P. Morgan also expects the company to increase its cost-cutting plans significantly. Goodyear has been planning for some time to sell the division and has said it expects to reach a definitive sale agreement in the first half of 2007.

Goodyear’s engineered products division is responsible for the production of various non-tyre rubber products, primarily for automotive and industrial uses. Germany’s Continental AG has expressed a firm interest in the division and executives at Continental have said they expect Goodyear to make a decision on its sale during the first quarter.