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UPDATE 3-Goodyear to buy Cooper Tire for $2.8 bln, nearly doubling China presence

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Shreyasee Raj and Sanjana Shivdas
·2 min read
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(Updates with share movement)

By Shreyasee Raj and Sanjana Shivdas

Feb 22 (Reuters) - Goodyear Tire & Rubber Co said itwould buy Cooper Tire & Rubber Co in a $2.8 billion dealto beef up its portfolio in the high-margin light truck and SUVsegments and strengthen its presence in North America and China.

Shares of Cooper, which has historically had strongermargins than Goodyear, jumped 20% in morning trade whileGoodyear stock was up 3.4%.

The deal, announced on Monday, nearly doubles Goodyear'spresence in China and broadens distribution for Cooperreplacement tires through Goodyear's network of 2,500 retailstores in the country. U.S. and China, the two largest tiremarkets in the world, account for about one-third of globalindustry volume.

The combined company will also benefit from Goodyear'soriginal equipment and Cooper's strength in the rapidly growinglight truck and SUV product segments.

The global tire industry was hard hit in 2020 as theCOVID-19 pandemic led to a sharp decline in demand forreplacement tires and original equipment, forcing automakers tohalt production.

However, industry experts expect a rebound in auto demandthis year, fueled by the rollout of COVID-19 vaccines, recordlow interest rates and healthy consumer savings as people heldoff spending money on large purchases during the pandemic.

Under the terms of the deal, the implied cash and stockconsideration for Cooper shareholders is $54.36 per share,representing a premium of 24% to its closing price on February19.

Goodyear expects about $165 million in run-rate costsynergies within two years after the deal closes. Goodyearshareholders will own about 84% of the combined company whileCooper shareholders will own about 16%.

Goodyear intends to fund the cash portion of the deal,expected to close in the second half of 2021, through debtfinancing. The combined company will be headquartered in Akron,Ohio.

Separately, Cooper reported a nearly 3% fall in quarterlyrevenue, while net income attributable to the company fell 25.8%to $37.99 million the fourth quarter ended Dec. 31.

Lazard is serving as lead financial advisor for Goodyearwhile Goldman Sachs & Co LLC is advising Cooper.(Reporting by Shreyasee Raj, Sanjana Shivdas and Rachit Vats;Editing by Aditya Soni and Krishna Chandra Eluri)