Rebuffing a merger offer from Pirelli, the Italian tire maker, Firestone Tire & Rubber has agreed to be acquired by Bridgestone Corp. of Tokyo for $2.6 billion in cash, the two companies announced Thursday.
The $80-per-share transaction would make Bridgestone the second-largest tire manufacturer in the United States, a market that the Japanese tire maker has found tough to crack.
"The Bridgestone offer achieves our objective of enhancing shareholder values and will add materially to the employment security and career opportunities available to the men and women employed by Firestone's existing businesses," Firestone Chairman and Chief Executive John J. Nevin said in a statement released late Thursday.
Chicago-based Firestone had agreed in mid-February to sell Bridgestone 75% of its worldwide tire manufacturing business for $1.25 billion. Firestone planned to keep its chain of 1,500 MasterCare automotive repair shops and other non-tire operations. But that deal was scuttled when Pirelli launched a $1.9-billion unsolicited takeover bid for Firestone on March 7.
Thursday's announcement may not deter Pirelli, which pushed ahead after the earlier Bridgestone deal. But Pirelli officials could not be reached for comment.
The takeover offer from Bridgestone did not come as a surprise because Firestone's board of directors on Monday told management to explore alternatives to the Pirelli offer, including a new deal with Bridgestone. The tug of war between Bridgestone and Pirelli is part of a battle among tire makers for worldwide dominance, analysts have said.
All Plants to Stay Open
Firestone's board on Thursday recommended that shareholders reject the $58-per-share bid from Pirelli and sell their shares to Bridgestone, which intends to launch its tender offer next Monday. Firestone also granted Bridgestone an option to buy 5.8 million, or 18%, of its shares at $80 each.
Wall Street has not yet had a chance to evaluate the offer, because the announcement was made many hours after the market closed. On the New York Stock Exchange, Firestone's stock closed at $62.50 a share on Thursday, down 62 1/2 cents.
Bridgestone President Akira Yeiri said all of Firestone's existing plants in North America will continue to operate. Bridgestone plans to maintain the Firestone tire operation's headquarters in Akron, Ohio, under current management.
"Our cooperation with Firestone over the years clearly demonstrates our sincerity in this regard as well as our commitment to the tire industry, both worldwide and in North America," Yeiri said. "Speaking for Bridgestone, I can say we are excited by the challenge and the opportunities that lie ahead."
Yeiri said Bridgestone and Firestone first discussed the possibility of combining their tire operations five years ago when Bridgestone bought Firestone's truck and bus tire factory in LaVergne, Tenn. Employment at the factory has nearly doubled since that time, he said.
The proposed sale of Firestone caps a nine-year push by Nevin to restructure the company, unload inefficient tire factories and expand the automotive repair business. Bridgestone and Firestone are both among the top five producers of tires in the world.
At the end of last year, Goodyear led the domestic automotive tire market with a 16% share, according to Modern Tire Dealer, a trade publication. Firestone was second with 9%; Michelin had 8.5%; Sears, 7.5%, and B. F. Goodrich, 4%.
Bridgestone had only 2%, but about half of the cars shipped to the United States from Japan come equipped with Bridgestone tires. Bridgestone has a 12% share of the truck and bus tire market in the United States.
A combined Firestone-Bridgestone would claim about 11% of the market, the magazine said.
Firestone was founded 88 years ago in West Virginia by Harvey S. Firestone, who pioneered the mass production of tires. It has since grown to become a multinational operation.
As of last October, Firestone employed 24,000 people in the United States and 29,000 in foreign countries.
WHERE THEY ROLL
Here is a breakdown of the tires that the Big Three auto makers put on their new cars in 1987. (According to Modern Tire Dealer magazine, Goodyear and Michelin led among Japanese car makers.)
Source: Modern Tire Dealer