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Goodyear To Acquire Rival Cooper For $2.8bn And Gain Wider Access in Chinese Market

Goodyear To Acquire Rival Cooper For $2.8bn And Gain Wider Access in Chinese Market
The largest tire maker of the United States, Goodyear will be acquiring its rival Cooper in a deal worth $2.8 billion. Following the completion of the deal, the American tyre maker will have access to a much larger global footprint for its business and will be able to move into the Chinese market as well – which is the largest car market of the world.
After the global market leaders in tire manufacturing - Japan's Bridgestone and France's Michelin respectively, Goodyear is already the third largest tire manufacturer of the world. that global position in the industry will be retained by Goodyear after the deal. However the global annual sales of the combined company will increase from the current global annual sales amount of the company of $12.3 billion to about $15 billion.
According to analysts however, the importance of the acquisition deal will be in the access to the Chinese market that Goodyear will gain from it. The Chinese market combined with the United States made up about one third of the total production of tires of the world in 2019. China has turned out to a very attractive destination for auto industry companies because it is the largest car market of the world – even larger than that of the United States.
"In China, the combination nearly doubles Goodyear's presence and increases the number of relationships with local automakers," the companies said in a statement.
The publication of the news propped up the shares of both the companies - Goodyear and Cooper and the stocks of the companies were up by about 20 per cent at the end of trading day on Tuesday.
According to the US Tire Manufacturers Association, it was estimated that the tire shipments in the US in 2019 had reached about 333 million units. And according to the China Rubber Industry Association, the number of tires shipped in China was double that of the US in 2019.
Goodyear and Cooper lag behind the market leaders in the Chinese market in terms market share and brand recognition even though the two companies are the two largest tire producers in the United States.
According to an estimate by Shenzhen-based Great Wall Securities at the end of 2019, about 12 per cent of the original tires fitted on new cars in China was accounted for by Michelin which had entered the Chinese market before its others global rivals. And according to a list compiled by China Tire Dealer, an industry publication, Michelin also noted to be the best brand in that segment last year and was followed by Italy's Pirelli and Japan's Bridgestone.
The deal "further strengthens Goodyear's leading position in the [United States], while significantly growing its position in other North American markets", the companies also said.
Cooper's shareholders will be paid in both cash and stocks by Goodyear for the deal while debt financing will be used by it to fund the cash portion. The company said that the deal is expected to get completed by the second half of the current year.

Christopher J. Mitchell

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