Why Shares Of Goodyear Tire & Rubber Are Up By More Than 15% Today?

Goodyear Video 22.02.21.

Goodyear Tire & Rubber Buys Cooper Tire & Rubber

Shares of Goodyear Tire & Rubber Company gained strong upside momentum after the company announced that it would acquire Cooper Tire & Rubber Company in a transaction with a total enterprise value of about $2.5 billion.

Shareholders of Cooper Tire & Rubber will get $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock for each Cooper share they own, which represents a 24% premium to Cooper’s closing stock price on February 19.

Goodyear stated that the transaction would strengthen its leadership position in the global tire industry. In addition, the deal should provide bring positive synergies and tax benefits. The company expects that the deal would be immediately accretive to earnings per share and would improve its balance sheet.

The market agrees with this view as the shares of Goodyear are up by more than 15% after the announcement of the deal. From a big picture point of view, Goodyear stock gained very strong momentum at the beginning of 2021 as it is already up by about 50% year-to-date.

What’s Next For Goodyear?

Goodyear has recently provided its quarterly earnings report, easily beating analyst estimates on both earnings and revenue. The report indicated that the company’s business was doing well despite the challenges posed by the coronavirus pandemic. Not surprisingly, the stock received several upgrades after the release of the quarterly report.

The decision to buy Cooper has also attracted positive analyst reviews as it would strengthen Goodyear’s market position while being accretive to earnings per share.

Demand for tires is expected to rebound once coronavirus-related restrictions are lifted around the world, and Goodyear’s shares were already showing strength at the beginning of this year in anticipation of this tailwind.

The purchase of Cooper has already served as a material bullish catalyst for Goodyear shares. The stock may have more room to run in case the near-term outlook for tire demand improves.

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