Titan Takes Over Goodyear’s Europe, Latin America Agri Businesses
The European and Latin American agricultural tyre businesses run by Goodyear Tire & Rubber have a new owner following their sale to Titan Tire Corporation. On December 13 the Titan International subsidiary announced its acquisition of the businesses, including a licensing agreement permitting Titan to manufacture and sell Goodyear-brand farm tyres in Europe, Africa, Eastern Europe, Russia, Latin America and North America. The deal is valued at approximately US$130 million, subject to post-closing adjustments.
This current agreement may set off a feeling of déjà vu, given that Titan and Goodyear made a similar deal in December 2005 regarding the assets of Goodyear’s North American agricultural business, including a factory in the state of Illinois. The European portion of the new transaction is subject to the exercise of a put option by Goodyear following completion of a social plan related to the previously announced discontinuation of consumer tyre production at its Amiens North France manufacturing plant in France and required consultation with the local works council. Upon completion of this action, as well as customary closing conditions and regulatory approvals, the transaction will include the Amiens North plant, property, equipment and inventories. The Latin American portion of the transaction includes Goodyear’s Sao Paulo, Brazil manufacturing facility, property, equipment and inventories. Subject to customary closing conditions and regulatory approvals, it is expected to close in the first half of 2011.
“Titan is pleased to be adding these new regions to our current book of global business,” said company chairman and CEO Maurice M. Taylor Jr. “These acquisitions support our global vision of becoming the premier farm tyre manufacturer in the world. In the past these assets have had sales in excess of $400 million US dollars annually. Going forward, my expectations are to increase the sales in a short period of time.”
For Goodyear, the sale of its European and Latin American agricultural tyre business gives it more scope to concentrate on other areas. “This transaction reinforces our focus on our core consumer and commercial tyre businesses,” said Richard J. Kramer, Goodyear chairman and chief executive officer. “Our farm tyre operations have been very successful for many decades. We thank our associates for their contributions,” he added. Kramer also expressed his confidence that Titan will maintain the company’s strong relationships with Goodyear farm tyre customers as well as the regions’ farming communities.
Assuming both the Latin American and European portions of the transaction are consummated, Goodyear anticipates its operating results, excluding any related gain or loss on the sales, will not be materially affected, although the impact on segment operating income will vary by region.
Deutsche Bank analysts describe the acquisition deal as “not surprising”, elaborating that “we knew that the remaining farm tyre businesses were no longer considered core.” The analysts also believe the two businesses’ revenue contribution to be considerably less than the $400 million stated by Maurice Taylor; they place the figure at around the breakeven point on an EBIT basis, on the grounds that the Latin America business was “likely profitable” but the European operations have been losing money. Deutsche Bank estimates Goodyear’s savings from the restructuring of this operation will be close to $30 million.
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