FINDLAY, Ohio—The independent firm hired to establish the fair market value of Cooper Chengshan (Shandong) Tire Co. Ltd. (CCT) has determined the Chengshan, China-based joint venture is worth approximately $440 million.
This revelation sets into motion the procedure agreed to Aug. 15 by the venture's owners, Cooper Tire & Rubber Co. and China's Chengshan Group Co. Ltd., which gives Chengshan the first option to elect, within 45 days, either to buy Cooper's 65-percent interest in CCT for 65-percent of the option price, to sell its 35-percent interest in CCT to Cooper for 35 percent of the option price, or to not exercise either option.
If Chengshan determines not to exercise either the put or call option, Cooper said it then will have the right to purchase Chengshan's 35-percent interest in CCT for 35 percent of the option price.
In the event that neither party elects to purchase the other's interest in CCT, the option agreement provides that the joint venture will continue as currently structured.
Further, should Chengshan opt to buy Cooper's stake in the joint venture, Cooper said it will continue to have offtake rights with CCT, which agrees under the terms of the Aug. 15 agreement to continue producing Cooper-brand products, including truck and bus radial tires, for a minimum of three years.
“We look forward to final resolution of the ownership of CCT as Cooper continues to pursue our growth plans for China,” said Cooper Chairman, CEO and President Roy Armes.
“Regardless of who owns CCT, Cooper is committed to continuing to build on the strong foundation we have in place in China by expanding our brand awareness and distribution network, and by growing profitable sales in the region through the original equipment channel and replacement tire market,” Mr. Armes added.
Management at Chengshan Group has not commented publicly on the evaluation.
The need for this agreement arose out of problems that surfaced with CCT last year during Cooper's merger negotiations with India's Apollo Tyres Ltd.
Workers at CCT refused to make Cooper-brand products for several months in protest.
CCT halted production in the last half of 2013 but returned to normal production levels in the first few months of 2014. That change included resuming production of Roadmaster-brand truck tires.
Cooper has been majority owner of CCT since early 2006, starting with a 51-percent stake and then raising that to 65 percent in 2010.
Cooper paid $88 million for its stake in the company.