News that a large India-based tire company is paying a premium to buy Findlay-based Cooper Tire & Rubber Co. helped boost Akron competitor Goodyear’s stock as well on Wednesday.
Apollo Tyres Ltd., based in Gurgaon, India, agreed to pay $35 a share to stockholders of Cooper Tire, or about $2.5 billion. That’s 43 percent higher than Tuesday’s closing price of $24.56.
Cooper stock on Wednesday closed up 41 percent to $34.66.
Apollo Tyres, which last month agreed to sell most of its South African operations to Sumitomo Rubber Industries Ltd. for $60 million, is looking to expand beyond India and Europe to meet its goal to be among the top 10 tire makers in the world by 2016. Apollo is India’s second largest tire maker; buying Cooper will make it the world’s seventh largest tire maker with combined 2012 sales of $6.6 billion, the company said.
As shares of Cooper stock soared in price with the announcement, Goodyear Tire & Rubber Co. stock also rose. Goodyear shares went as high as $16.15 in pre-market trading following Tuesday’s closing price of $14.60. Shares hit a high of $15.35 during regular trading hours Wednesday, closing at $14.93, up 33 cents, or 2.25 percent.
A CNN Money news video noted the early trading interest in Goodyear shares, but said that does not necessarily mean Goodyear also will be an acquisition target.
“We don’t comment on rumors. We don’t comment on stock price. We don’t comment on competitors,” Goodyear spokesman Keith Price said.
The Apollo purchase of Cooper will be the biggest takeover of an auto parts maker since 2007, according to Bloomberg News.
Apollo Tire is making a commitment to maintain the company’s three U.S. manufacturing plants and retain its management operation in Ohio, Cooper’s chief executive, Roy Armes, said Wednesday.
Armes said the two companies are a good strategic fit because each is in different markets.
“The lack of overlap is where the opportunities really are,” he said.
The acquisition will provide “scale and geographical presence including the American and European market, that’s a mature market, and India and China, that’s a growing market,” Neeraj Kanwar, vice chairman of Apollo Tyres, told reporters at a briefing in Gurgaon.
The deal will give Cooper’s customers access to new products such as off-road and farm tires, which could eventually be made at one of the company’s North American plants, Armes said. “It won’t make sense to import everything from India,” Armes said.
Apollo has made a “pretty strong commitment” not to shut down plants in Findlay in northwest Ohio, Tupelo, Miss., and Texarkana, Ark., Armes said.
Apollo also plans to honor the terms of labor contracts currently in place and generally maintain pay and benefit levels for non-union employees.
Cooper executives are expected to continue leading the company from its headquarters in Findlay, but details haven’t been finalized. Cooper has about 13,000 employees around the world.
The deal, pending Cooper shareholder and regulatory approval, is expected to close later this year. Cooper will become privately held.
Apollo Tyres and Cooper will borrow money from four banks, Apollo Tyres Chief Financial Officer Sunam Sarkar said. The two companies will jointly raise $2.5 billion from the sale of bonds with maturity of up to eight years, he said.
Cooper Tire shares had fallen 3.2 percent this year through Tuesday, compared with a 16 percent increase for the Russell 2000 index of publicly traded companies.
Cooper had revenue of $4.2 billion in 2012 and estimates its market share in the U.S. at 14 percent of all replacement tires sold.