AKRON, Ohio, June 4, 2015 /PRNewswire/ --
-- Transaction accretive to adjusted net income beginning in 2016
-- No impact to 2015, 2016 financial targets or capital allocation plan
The Goodyear Tire & Rubber Company announced today that it has reached agreement with Sumitomo Rubber Industries, Ltd. (SRI) to dissolve the global alliance between the two companies.
Goodyear and SRI formed the global alliance in 1999. It primarily consists of four joint venture operating companies, one each in North America and Europe, and two in Japan.
"While we have derived value from the alliance over the last 16 years, Goodyear is well positioned today to pursue our strategy on our own," said Goodyear Chairman and Chief Executive Officer Richard J. Kramer. "This successful resolution increases our flexibility to grow profitably as we continue to focus on delivering strong performance and sustainable economic value."
Kramer concluded, "We are committed to a smooth and orderly transition that will be seamless to our customers and consumers in North America, Europe and Japan."
The agreement announced today, when closed, would resolve the pending arbitration filed in January 2014. The agreement enables both companies to avoid the cost and uncertainty of the arbitration process.
Overview of Agreement
North American Joint Venture
- SRI (currently 25 percent interest) will acquire Goodyear's 75 percent
interest in Goodyear Dunlop Tires North America, Ltd. (GDTNA), which primarily
manufactures and sells Dunlop-brand tires in North America, including full ownership
of the joint venture's tire plant in Tonawanda, N.Y.
- Goodyear will retain exclusive rights to sell Dunlop-brand tires in both the
consumer and commercial replacement markets of the United States, Canada and Mexico as
well as to non-Japanese vehicle manufacturers in those countries.
- In addition to assuming full ownership of the Dunlop motorcycle tire business
in North America, SRI will have rights to sell Dunlop-brand tires to Japanese vehicle
manufacturers in the United States, Canada and Mexico.
European Joint Venture
- Goodyear (currently 75 percent interest) will acquire SRI's 25 percent
interest in Goodyear Dunlop Tires Europe B.V. (GDTE).
- Goodyear will retain exclusive rights to sell Dunlop-brand tires in both
replacement and original equipment consumer, commercial, motorcycle and racing markets
in European countries where the current joint venture exclusively serves the market.
- SRI will obtain exclusive rights to sell Dunlop-brand tires in certain
countries that were previously non-exclusive under the global alliance, including
Russia, Turkey and certain countries in Africa.
Japanese Joint Ventures
- Goodyear (currently 25 percent interest) will acquire SRI's 75 percent
interest in Nippon Goodyear Ltd., which serves the replacement market in Japan with
Goodyear-brand tires.
- SRI (currently 75 percent interest) will acquire Goodyear's 25 percent
interest in Dunlop Goodyear Tires Ltd., which serves the original equipment market in
Japan with Goodyear- and Dunlop-brand tires.
- Goodyear will regain exclusive rights to serve the Japanese replacement and
original equipment markets with Goodyear-brand tires.
- SRI will continue to have exclusive rights to sell Dunlop-brand tires in the
Japanese replacement and original equipment markets.
Financial Terms of Agreement
Under the terms of the agreement, Goodyear will pay SRI $271 million upon closing of the transaction, which is expected in the fourth quarter of 2015. The transaction does not impact the company's existing 2015 and 2016 financial targets or capital allocation plan. The outlay is included in the approximately $600 million designated for restructurings under the capital allocation plan. In addition, Goodyear will repay a pre-existing debt of approximately $55 million to SRI within three years from the date of closing. As a result of the agreement, Goodyear will also sell its 3.4 million shares of SRI common stock.
Goodyear expects the transaction to be accretive to its earnings beginning in the first quarter of 2016, related mainly to the elimination of minority interest in GDTE. Based on the company's 2015 operating plan, the annual benefit to adjusted net income would be approximately $40 million to $50 million (15-18 cents per share).
The transaction is subject to customary closing conditions, including the receipt of regulatory approvals as well as SRI's completion of a labor agreement with the United Steelworkers union for the Tonawanda plant.
Conference Call
Goodyear will discuss this agreement on an investor conference call at 9 a.m. EDT on Friday, June 5. Participating in the call will be Laura K. Thompson, executive vice president and chief financial officer; and Christina L. Zamarro, vice president, investor relations.
Prior to the commencement of the conference call, the company will post the financial and other related information that will be presented on its investor relations Web site: http://investor.goodyear.com .
Investors, members of the media and other interested persons can access the conference call on the Web site or via telephone by calling either 800-895-4790 or 785-424-1071 before 8:55 a.m. EDT on June 5 and providing the Conference ID "Goodyear." A taped replay will be available by calling 800-723-6062. The replay will also remain available on the Web site.
Goodyear is one of the world's largest tire companies. It employs about 67,000 people and manufactures its products in 50 facilities in 22 countries around the world. Its two Innovation Centers in Akron, Ohio and Colmar-Berg, Luxembourg strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. For more information about Goodyear and its products, go to http://www.goodyear.com/corporate . GT-FN
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