Goodyear Speeds Up Restructuring Effort, Slates Stock Buyback
Goodyear Tire & Rubber stepped up its restructuring effort Thursday, saying that it plans to repurchase as much as 18.3% of its stock.
The company also said it might divest its aerospace and motor-wheel subsidiaries, and it already has said it plans to sell its Celeron Corp. energy unit.
Goodyear launched the restructuring last week after a group led by Anglo-French financier Sir James Goldsmith announced that it owned 11.5% of Goodyear’s stock and was interested in acquiring the huge tire maker.
Goldsmith, meanwhile, disclosed on Wednesday that he made a friendly offer to buy the 88.5% of Goodyear that his group does not already own for $49 a share, or $4.73 billion. But he indicated that he would temporarily table the offer pending the results of Goodyear’s restructuring moves.
Under the buyback portion of the restructuring, Goodyear said it initially would repurchase in the open market up to 20 million of its 109 million common shares outstanding.
The developments prompted continued heavy trading in Goodyear’s stock, which fell $1.25 a share to $48 in New York Stock Exchange composite trading Thursday. More than 5.5 million shares changed hands, making it the Big Board’s most active issue.
Goldsmith said earlier this week that he was unwilling to make a tender offer for Goodyear because the market price of the company’s stock, responding to the takeover speculation, had climbed too high.
In a meeting Wednesday night with Robert E. Mercer, Goodyear’s chairman and chief executive, and their financial advisers, Goldsmith made his $49-a-share proposal but reiterated that he was currently unwilling to bid more. The stock had closed earlier that day at $49.25 a share.
Goodyear’s advisers, in turn, told Goldsmith that they believed that Goodyear’s restructuring plan overall will be valued in the market at more than $50 a share.
The meeting was described in a statement issued by Goldsmith, which he said was part of a filing his group planned to make with the Securities and Exchange Commission.
Goldsmith also released a letter he wrote to Mercer, dated Wednesday, in which he said that “if the restructuring that you envisage provides to all shareholders a greater value for all of their shares than the price we are willing to pay, we would be totally supportive of your endeavors.”
The letter continued: “On the other hand, should we acquire control of Goodyear, we would be committed to the long-term improvement of Goodyear’s core business, and we would have every intention to maintain Goodyear’s position as the best tire and rubber company in the world.”
Goldsmith had said previously that he believed Goodyear would be a stronger company if it divested its non-tire operations, and Goodyear’s restructuring proposals indicated the company was willing to make the same moves in order to retain its independence.
