Goodyear Signs Contract to Sell Dunlop to Sumitomo Rubber

The Goodyear Tire & Rubber Company GT recently signed a definitive agreement to sell the Dunlop brand, including trademarks and intangible assets necessary for its operations in Europe, North America and Oceania, to Sumitomo Rubber Industries, Ltd. (“SRI”). The sale, which encompasses consumer, commercial and other specialty tires, also involves the transfer of certain associated intellectual property. This decision follows Goodyear’s strategic review of the Dunlop brand as part of its Goodyear Forward transformation plan. Under the terms of the agreement, SRI will pay GT approximately $701 million at closing, covering the transfer of the brand, a Transition Fee to support the transition process and the purchase of Dunlop tire inventory. Additional provisions include ongoing licensing, offtake agreements and other collaborative arrangements.Per Mark Stewart, CEO and president of Goodyear, optimizing the portfolio and reducing leverage aligns with Goodyear's goal of driving long-term shareholder value while sharpening the focus on its core brands. The transaction, which is subject to regulatory approvals, customary closing conditions, and consultations, is expected to close by mid-2025. Goodyear plans to use the proceeds from the sale to reduce debt and fund initiatives associated with the Goodyear Forward transformation plan.Goldman Sachs & Co. LLC is serving as the lead financial advisor to Goodyear, while Barclays Capital Inc. is serving as an additional financial advisor, and Cleary Gottlieb Steen & Hamilton LLP is providing legal counsel.Agreement DetailsGoodyear will receive the payment from SRI in three parts. The first component is $526 million for the Dunlop brand and its related intellectual property. The second is a $105 million Transition Fee for Goodyear's support in transitioning the brand and associated intellectual property, as well as assisting with customer transition and logistical planning. The third component is the sale of Dunlop tire inventory, estimated at $70 million, with the final amount to be confirmed before closing.As part of a Transition License Agreement (TLA), Goodyear will continue to manufacture, sell and distribute Dunlop-branded consumer tires in Europe until at least Dec. 31, 2025, with a potential one-year extension. During this time, GT will pay SRI royalties on sales but retain all profits. The transition period is intended to allow SRI to scale its operations and ensure continuity for existing customers. After the TLA expires, Goodyear will supply certain Dunlop tires to SRI in Europe for five years under a Transition Offtake Agreement (TOA), which guarantees minimum purchase quantities of 4.5 million tires annually. SRI may terminate the TOA early after three years, subject to a termination fee. Goodyear will also license back Dunlop trademarks for commercial truck tires in Europe, paying royalties on sales while retaining the right to terminate the agreement at any time.In 2023, Dunlop consumer tire sales totaled $532 million, with commercial tire sales and specialty tire sales contributing $201 million and $22 million, respectively. Goodyear will retain rights to the Dunlop trademarks for motorcycle tires in Europe and Oceania. The company does not anticipate the transaction to significantly affect segment operating income during the TLA period. However, after the TLA, Goodyear expects an annual reduction in operating income of $65 million during the TOA term, though this estimate excludes potential cost savings from debt repayment and other strategic actions.Goodyear’s Zacks Rank & Key PicksGT currently carries a Zacks Rank #4 (Sell).Some better-ranked stocks in the auto space are Suzuki Motor Corporation SZKMY, Geely Automobile Holdings Limited GELYY and Blue Bird Corporation BLBD, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for SZKMY’s fiscal 2025 sales and earnings suggests year-over-year growth of 2.38% and 33.77%, respectively. EPS estimates for fiscal 2025 and 2026 have improved 43 cents and 46 cents, respectively, in the past 60 days.The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales and earnings suggests year-over-year growth of 60.04% and 149.31%, respectively. EPS estimates for fiscal 2025 and 2026 have improved by 15 cents and 38 cents, respectively, in the past seven days. The Zacks Consensus Estimate for BLBD’s fiscal 2025 sales and earnings suggests year-over-year growth of 10.97% and 12.14%, respectively. EPS estimates for fiscal 2025 have improved 18 cents in the past 60 days.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goodyear Tire & Rubber Company (GT): Free Stock Analysis Report Geely Automobile Holdings Ltd. (GELYY): Free Stock Analysis Report Blue Bird Corporation (BLBD): Free Stock Analysis Report Suzuki Motor (SZKMY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks