Goodyear to Sell Dunlop Brand to Sumitomo Rubber for $700 Million; Analyst Responds Positively

Investing.com -- Goodyear Tire & Rubber has announced plans to sell the Dunlop brand to Japan's Sumitomo Rubber Industries for approximately $700 million. Goodyear shares rose by 1.8% in pre-market trading.

The Ohio-based tire manufacturer confirmed on Tuesday that it has agreed to transfer the Dunlop trademarks and intangible assets in Europe, North America, and Oceania to the Japanese rubber products manufacturer. The deal involves the sale of Dunlop assets related to consumer, commercial, and other specialty tires. Sumitomo Rubber will pay Goodyear approximately $701 million at closing. This payment includes the costs associated with the transfer of the Dunlop brand to the relevant regions, certain transition-related fees, and the purchase of Dunlop tire inventory.

Goodyear stated that it plans to use the proceeds from the sale to reduce its financial leverage and fund other initiatives. The decision to sell the Dunlop brand came after a strategic review of the brand. The completion of the transaction is subject to regulatory approvals and is expected to be finalized by mid-2025.

According to Goodyear, Dunlop consumer tire sales were $532 million in 2023, while commercial tire sales were $201 million. As part of the agreement, Goodyear will retain certain rights related to the Dunlop brand. Specifically, it will relicense the Dunlop trademarks for truck tires in Europe and retain rights to the Dunlop trademarks for motorcycle tire operations in Europe and Oceania.

Morgan Stanley analysts wrote in their notes: "This transaction helps Goodyear reduce its exposure to non-premium tires in the medium term; this segment continues to be an area where tire manufacturers face industry challenges. In the long run, a key question will be how Goodyear can utilize its idle capacity once its contract manufacturing period is complete and the magnitude of the capital expenditures required for re-equipping."