Goodyear to sell Dunlop brand to Sumitomo Rubber for $700M; analyst reacts positively

Investing.com -- Goodyear Tire (NASDAQ:GT ) & Rubber has announced plans to sell its Dunlop brand to Japan’s Sumitomo Rubber Industries for approximately $700 million.

Goodyear shares rose 1.8% in pre-market trade.

The Ohio-based tiremaker confirmed on Tuesday that it has agreed to transfer the Dunlop trademarks and intangible assets in Europe, North America, and Oceania to the Japanese rubber product manufacturer.

The deal involves the sale of Dunlop assets related to consumer, commercial, and other specialty tires. Sumitomo Rubber will pay Goodyear about $701 million upon closing. This payment includes the cost of transferring the Dunlop brand across the relevant regions, certain transition-related fees, and the purchase of Dunlop tire inventory.

Goodyear has stated it plans to use the proceeds from the sale to reduce its financial leverage and fund other initiatives. This decision to sell the Dunlop brand comes after a strategic review of the brand was conducted.

Completion of the transaction is dependent on regulatory approvals and is anticipated to be finalized by mid-2025.

In 2023, Dunlop consumer tire sales totaled $532 million, while commercial tire sales reached $201 million, according to Goodyear. As part of the agreement, Goodyear will retain certain rights to the Dunlop brand.

Specifically, it will license back the Dunlop trademarks for truck tires in Europe and keep its rights to the Dunlop trademarks for its motorcycle tire businesses in Europe and Oceania.

"This transaction helps Goodyear reduce its exposure to non-premium tires in the medium term, a segment where tire manufactures are continuing to face industry headwinds. In the long term, a key question will be how Goodyear can use its spare capacity following the completion of the offtake period and the magnitude of capex required for re-tooling," Morgan Stanley (NYSE:MS ) analysts wrote in the note.

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Source: Investing.com