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Cooper Tire Buyout Briefly Gooses Up Goodyear

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Word that Cooper Tire (CTB) has gotten a buyout offer from overseas was lifting Goodyear Tire & Rubber (GT) Wednesday, but as the session wore on the initial euphoria surrounding the hope for potential consolidation in the group was subsiding.

Goodyear tires: Credit AP

As can happen when an industry counterpart is getting bought, Goodyear received an early boost on the news that India's Apollo Tyres would acquire Cooper, of Findlay, Ohio, for about $2.5 billion, or $35 a share. That would be a 43% premium to Cooper's Tuesday close at $24.56.

Goodyear reached $15.35 in regular trading, up 5.1%, at its apex. However, by the afternoon, the advance had been halved. Lately, the stock was higher by 2.5% at $14.96.

For Cooper, the deal with Apollo will make the combined firm the seventh-largest tire maker globally, with revenue of $6.6 billion, the companies said. It will still trail significantly the sales of the world's giant tire sellers, such as Germany's Continental AG, Japan's Bridgestone and France's Michelin, as well as Akron, Ohio-based Goodyear, which had $21 billion in revenue last year.

Cooper's highest close ever came on April 15, 1993, according to FactSet data, when it ended the day at $39.63. It was a $3-and-change stock, roughly 1/10th of the Apollo bid, as recently as the spring of 2009. The shares have been between $15.25 and $34.79 -- the latter being reached post-buyout offer -- in the past year.

On the day, Cooper's surge of 40.5% made it the No. 2 percentage climber among NYSE stocks, behind only the 44% jump in Gigamon (GIMO), trading after its initial public offering.

Goodyear's market cap of around $3.7 billion is well above Cooper's now $2.2 billion, measured following the acquisition proposal that bolstered that substantially. Goodyear's enterprise value puts even more separation between the two, coming in at roughly $9.1 billion and showing that it would be a much bigger outlay for any would-be suitors. Cooper's enterprise value, with the takeover built in, has jumped right to the $2.5 billion deal price.

A former member of the Dow Jones Industrial Average, Goodyear peaked above $75 in 1998, but by the latter part of 2002 the blimp flier had slumped to the single digits. It did get back above $35 in mid-2007, though it's lost more than half of its market value over the prior six years. The stock has traded between $9.55 and $16.06 in the last 52 weeks.

FactSet merger data lists 18 announced deals this year in excess of $2 billion. The largest is the ongoing attempt to purchase computer designer Dell (DELL) for more than $24 billion. The biggest takeover of 2013 involving a foreign buyer of a U.S. company is the pact for ketchup producer Heinz by Warren Buffett's Berkshire Hathaway (BRK-A) and 3G Capital, which has roots in Brazil.

Two weeks ago, Virginia-based pork producer Smithfield Foods (SFD) reached an agreement to be acquired by Shuanghui International Holdings of China for $4.7 billion, or $7.1 billion including debt.