HYOGO, Japan — Bridgestone Corp. and Toyo Tire Corp. have agreed to sell roughly half of the shares they hold in each other, a cross-holding that dates to a business and capital alliance the Japanese tire makers formed in 2008.
Toyo said it plans to sell nearly 1.95 million Bridgestone shares that it bought in 2008. At the same time, Toyo said Bridgestone is expected to sell half of the 10 million shares of Toyo it bought in 2008.
After the share sales — expected to take place in February 2020 — Toyo said the business and capital alliances between the two companies will remain intact.
"Amid dramatic ongoing changes in the operating environment for tire manufacturers," Toyo said, "the two companies will continue to advance their partnership over the mid- and long-term, in order to sustain enhancement of corporate value."
Toyo said it expects to realize a gain of about $37 million on the sale; thereafter it will continue to hold about 1.9 million Bridgestone shares, or about 0.25% of that company's outstanding shares.
Bridgestone has as yet not commented on the deal publicly. Its shareholding in Toyo represents 6.49% of Toyo's outstanding shares, Toyo said.
At the time the alliances were announced in 2008, the companies said they had formed project teams to look at specific areas, including advanced productions systems; joint purchasing of raw materials; sharing production resources; logistics and business other than tires.
In the 11 years that the alliances have existed, the two companies have experienced synergies through the effective use of each other's strengths and management resources in various areas, Toyo said, including the "development of tire production technology" and "procurement of raw and other materials and equipment."
This has helped them enhance their respective corporate value and establish a stable relationship with mutual trust, Toyo said.
Toyo said it is re-evaluating its consolidated earnings forecasts for the year ending Dec. 31, 2019, to take into account this sale of stock and other factors that might affect said forecast. If the need to revise earnings forecasts arises, relevant information shall be disclosed immediately, Toyo said.
This announcement comes a year after Japanese conglomerate Mitsubishi Corp. increased its shareholding in Toyo to 20% from 3.05% as part of a wide-ranging strategic partnership designed to enhance Toyo's global distribution assets, help it compete more effectively in the evolving mobility sector and fund capacity expansions.
Tokyo-based Mitsubishi spent over $450 million to buy 26.9 million newly issued shares.
In its most recent quarterly earnings report, Toyo reported a 13.9% drop in operating income, to $246 million, on 2.6% lower sales of $2.58 billion. Fpr the full fiscal year, Toyo is forecasting a 10.4% drop in operating income on 3.4% lower sales.