FINDLAY, Ohio—Cooper Tire & Rubber Co. has signed an agreement to acquire Standard Products Co., corporate parent of retreading materials and equipment supplier Oliver Rubber Co. Officials said the acquisition will make Cooper North America's largest manufacturer of automotive sealing systems—a core product of the Findlay-based company's engineered products group. The merger also will significantly expand Cooper's global presence, a key element in its strategic growth plan, the company said.
Patrick Rooney, Cooper's chairman and CEO, called the deal ``a tremendous opportunity, and exactly what we planned with our Cooper 21 strategy,'' which the company has been formulating over the past two years.
Thomas A. Dattilo, Cooper president and COO, said the plan calls for the company to become a global player in both its tire and engineered products operations.
During its first full year of combined operation, Cooper expects to generate sales of approximately $3.2 billion, of which about half will come from tires and the remainder from engineered products.
Cooper ranks eighth among the world's largest tire manufacturers, based on 1998 tire sales of approximately $1.5 billion. Tires accounted for about 77 percent of the company's total revenues that year.
Besides tires and inner tubes, Cooper, through its engineered products group, also makes vibration control products, hoses and sealing systems for the automotive original equipment market.
Standard Products is one of the world's major suppliers of automotive sealing systems, plastic trim and vibration control products, all of which accounted for about 70 percent of its $1.1 billion total sales in 1998.
The company's Holm Industries Inc. is said to be the largest supplier of seals for commercial refrigerators and home construction in North America.
Standard Products' Oliver Rubber unit posted sales of $160 million in fiscal 1999 or about 14.5 percent of its parent's total sales.
Under terms of the agreement, Cooper will pay about $584.4 million for Standard Products' stock and assume another $173 million in that company's debt.
Standard Products' stock will be exchanged for $36.50 in cash or the equivalent value in Cooper stock. The exchange rate will be determined based on the average closing price of Cooper stock prior to the transaction's closing date.
The transaction has been approved by the board of directors of both companies and is expected to be completed during the fourth quarter, Cooper's announcement said.
With a combined total of more than 20,000 employees resulting from the merger, some financial analysts predict cuts.
But Dennis Virag, president of Automotive Consulting Group Inc., Ann Arbor, Mich., called Cooper ``a very well-managed company'' and predicted that any redundant employees will be reabsorbed by Cooper for expansion purposes.
``I think the efficiencies they've been able to leverage in their own company could be easily transferred to Standard Products,'' he said.
Other analysts worry about execution risk and Standard Products' operating margins, which are consistently lower than Cooper's. However, Mr. Virag disagrees.
``I think they're looking at it strictly from a financial standpoint rather than from a total business standpoint,'' he said.
Cooper's management control and systems are among the best in the industry, Mr. Virag said. He looks for substantial increases in Standard Products' margins.
Saul Ludwig with McDonald & Co. Securities Inc. agreed. ``There's no question that Standard Products has had an uneven past,'' but Cooper ``is a company that is exceptionally attuned to detail.''
Mr. Dattilo came to Cooper from Dana Corp. and has a lot of experience making acquisitions and integrating the new operations, Mr. Ludwig said.
Sherri Begin of Crain News Service contributed to this report.