(Editor's Note: This story is part of our #TireBiz30 in which we feature one archived story every day of September to celebrate Tire Business' 30th anniversary. Each story represents one of the most relevant news story published in our pages for that year.)
AKRON — Goodyear management has ended Sir James Goldsmith's takeover bid by agreeing to buy out the Anglo-French financier's 11.5-percent stake in the firm.
The total cost of the multifaceted deal, announced Nov. 20, could run as high as $3 billion after all aspects of the buy-out and a company restructuring are completed.
Goldsmith and his partners will receive $49.50 for each of their 12.5 million shares in Goodyear, or about $618.8 million, some $91 million more than they paid for them. The company also agreed to reimburse Goldsmith for "certain expenses, and to indemnify (him) against certain claims." Goodyear did not specify how much the expenses and compensation will cost.
Goodyear also announced a tender offer to buy back 40 million of its own shares at $50 each for a total of $2 billion. Meanwhile the company will carry out its previously announced restructuring program. This involves the sale of its Celeron Corp., Goodyear Aerospace Corp. and Motor Wheel Corp. subsidiaries, the implementation of an early retirement program and "wide-ranging expense reduction measures."
For his part, Goldsmith and his group agreed not to purchase Goodyear stock for five years.
In a letter to employees, Goodyear Chairman Robert E. Mercer said he believed Goldsmith withdrew his takeover bid because of tremendous civic pressure.
"In my opinion, the sight of whole communities rising up against an unwarranted takeover attempt was the major factor in Goldsmith's decision to sell out," Mercer said. "The name of Goodyear is still ours to maintain, cherish and protect," he said. Goldsmith, however, indicated he was pressured into accepting Goodyear's offer by a bill in the Ohio Legislature that was close to putting a weapon in Goodyear's hands that could have seriously injured his bid.
On Nov. 19, the state Senate approved a bill that carried several amendments tailored to aid Goodyear in its battle with Goldsmith. One of the most lethal amendments was offered by Ohio State Rep. Robert Cupp. It would permit a company's directors to selectively lock out certain major shareholders from using their options to buy more stock. The bill, which still had to be approved by the Ohio House, was expected to be delivered to Ohio Gov. Richard Celeste for signing by the weekend.
Other amendments involved in the bill would allow Goodyear to include such intangible assets as patents when assessing the value of the company, and would protect directors from liability in the case of company loans made to employee stock ownership plans.
On Nov.19, Goldsmith said that he again proposed a tender offer of $49 per share for all Goodyear shares that he did not control.
"After Mr. Mercer and his advisers again rejected our proposal, we carefully evaluated our options against the background of the proposed Ohio legislature and determined that we had no other alternative but to agree to the company's proposal that it repurchase our shares at $49.50 per share, plus expenses."
On Nov. 19, Goodyear stock had fallen to $41.75 a share.
In accepting the deal, Goldsmith said that his partnership would "use our best efforts to make available to Goodyear any banking facilities we arranged for our offer."
Part of the price Goodyear paid to fend off the takeover bid includes shouldering some heavy debt, Mercer said. Midway through the takeover battle Goodyear reportedly tripled its line of credit within the banking industry to $3 billion-about the Cost of the announced buy-back program. Company officials were unavailable to comment on the credit total.
Goodyear also may pay back some of the debt incurred in the buy-back through the sale of the three subsidiaries. An industry analyst suggested that Goodyear could gain as much as $1.5 billion on the sale of its Celeron subsidiary, which Goodyear bought in 1983 and had invested about $1 billion in its operations.
The sale of the Goodyear Aerospace subsidiary could fetch Goodyear as much as $700 million, although others believe the aerospace operation may not be as valuable as it once was.
The effect of the takeover bid and its solution upon Goodyear already is being felt. With Goodyear's two major areas of diversification on the selling block, the company already is cutting away at other operations.
Since the takeover bid, Goodyear has eliminated its blimp operations in Europe, cut support for Formula One racing in Europe, dismembered its Howdins Ltd. operation in the United Kingdom and dispersed its key research staff and Operations between its Luxembourg and Akron facilities.
"Make no. mistake about it, Goodyear would have been much better off today if the Goldsmith group had not attempted to raid us," Mercer said.
Goodyear and Goodyear Aerospace are major employers in Akron, and the citizens of the city reacted to. Goldsmith's takeover bid in a manner that a Congressman from the area likened to the bombing of Pearl Harbor. Mercer made Goldsmith's nationality an issue and the city rallied to the call, holding meetings, petition drives, stock-purchasing programs, and even planned a prayer meeting in Washington.