Gencorp Selling Tire Unit for $650 Million

Gencorp Inc., the conglomerate that has been shedding businesses to pay for a costly stock buyback, agreed Monday to sell its tire unit to West Germany’s Continental Gummi-Werke AG for $650 million in cash.

Continental Gummi, Europe’s second-largest tire maker with annual revenue of $2.6 billion, said earlier this month that it would bid for General Tire & Rubber, Gencorp’s original business, which was on the block in April.

Gencorp, an Akron-based firm whose businesses range from soft drink bottling to radio stations, said it was selling the unit to help pay for a $1.6-billion stock buyback, which was used to thwart a hostile takeover offer made last March by AFG Industries and Wagner & Brown.

Gencorp fought off the unwanted bid by repurchasing 54% of its stock for $130 a share. The defensive strategy put the company so deeply in debt that it was forced to put up some of its assets for sale. They include its bottling operations, its RKO General film studio unit and some RKO broadcast properties as well as the tire unit.

Gencorp said earlier that Italy’s Pirelli Tire was also interested in the tire unit. Two weeks ago, General Tire’s management offered to take it private through a leveraged buyout. Analysts estimated the prices offered for the unit, which accounted for more than half of Gencorp’s 1986 operating profit, ranged from $550 million to $600 million.

Continental Gummi had a previous agreement with Gencorp under which the tire unit produced 500,000 Continental Gummi tires for sale in the U.S. Continental Gummi Chairman Helmut Werner has said the acquisition of the tire company would give his firm a “new strategic dimension” that would help ensure its future.