FINDLAY, Ohio (Aug. 12, 2014) — Cooper Tire & Rubber Co. has extended, for a brief, undetermined period, the deadline for the option agreement to begin pertaining to the ownership of Cooper Chengshan (Shandong) Tire Co. Ltd. (CCT), pending receipt of the independent “fair market” valuation of that entity.
Originally, Aug. 11 was the deadline that Cooper, Chengshan Group Co. Ltd. and the CCT labor union had determined in the agreement they signed in January, which set forth a process to determine the ownership of CCT.
“The process to arrive at the long-term ownership of CCT is ongoing,” said Cooper Chairman, CEO and President Roy Armes.
“(Aug. 11) was the deadline for the independent valuation firm to deliver its fair market valuation of CCT, which would have put in motion the put and call options specified by the January agreement.
“Cooper has briefly extended that deadline to allow for some additional work to take place related to the process. We will continue to communicate with investors and others at key points in this process as appropriate,” he said.
During Cooper’s recent second quarter conference call with analysts, Mr. Armes noted: “We continue to work through that process and, regardless of the ownership outcome, China will continue to be an important part of Cooper’s long-term growth strategy.”
Once a valuation is established, Cooper said Chengshan will have 45 days to either purchase Cooper’s 65-percent stake in the company or sell its own 35-percent interest to Cooper. Should Chengshan decide not to exercise either option, Cooper has the right under the agreement to purchase Chengshan’s share.
Although CCT halted production in the last half of 2013 and the beginning of 2014, the venture has now returned “to normal production levels, which helps support the volume growth in the quarter,” Mr. Armes said.
That change included CCT’s resuming production of Roadmaster-brand truck tires earlier this year and production of all brands is ongoing, with the plant now nearly at full production levels. Mr. Armes said customers have been responding well to the Roadmaster tires and Cooper is working to continue this business segment.
Cooper has been majority owner of CCT since early 2006, paying $70 million at that time for a 51-percent stake in what then were two separate ventures—Cooper Chengshan (Shandong) Passenger Tire Co. Ltd. and Cooper Chengshan (Shandong) Truck Tire Co. Ltd.
The deal included a 25-percent stake in a steel cord factory located adjacent to Shandong Chengshan’s plant in Rongchen City, which Cooper later divested.
Cooper boosted its stake in CCT to 65 percent in 2010 at Chengshan Group’s request, paying approximately $18 million for the additional 14-percent share.
How have local road conditions and/or road construction impacted tire repairs/automotive services at your dealership?
|We've seen an increase in business.||
40% (17 votes)
|Things are holding steady.||
50% (21 votes)
|Business is trending down.||
10% (4 votes)
|Total votes: 42|