CLEVELAND (Aug. 12, 2016) — The Wall Street Journal (WSJ) reported this week that an activist investor is pushing Akron-based Goodyear “to return $4.5 billion to investors over the next three years in a bid to boost the tire giant's flagging stock price.”
In a letter to Goodyear's board, hedge fund Marcato Capital Management L.P. said it is “impressed” by tire maker's management and recent performance, but lamented its languishing stock, according to the WSJ. The paper noted that the company's shares are down 15 percent this year — “even as rising truck and SUV sales and falling gas prices lifts demand for its tires.”
“We believe if the company targets this magnitude of capital return, it would create significant shareholder value, and we would not be surprised to see the share price increase by as much as 50-100 percent as a result,” wrote Marcato's Richard “Mick” McGuire in the letter, which was reviewed by the WSJ.
A spokesman for Goodyear said the company wouldn't comment on its plans before its Sept. 15 investor day in Boston.
The Journal said Mr. McGuire, who founded Marcato in 2010, is a protégé of well-known activist investor William Ackman.
The letter “isn't a threatening missive and doesn't push for performance improvements or board changes, like typical activist letters,” according to the WSJ story. Rather, “it includes a long list of topics Marcato wants the company to address at its investor day next month.”
For instance, the Journal said, the firm “calls for Goodyear to implement specific margin targets and provide investors with more data on how the company has handled raw material costs.”
Scott Suttell is managing editor of Crain's Cleveland Business magazine, a sister publication of Tire Business.