Cooper Tire & Rubber Co (CTB), The Goodyear Tire & Rubber Company (GT): The Synergies in the Apollo-Cooper Deal

Michelin has already invested $1.5 billion to build a tire factory in Shenyang to focus on the high-end replacement tire segments of China’s tire market. With Asian growth in mind, Bridgestone has opened a new plant in India with the capacity to manufacture 10,000 passenger car tires per day by the end of 2013. The poor economic climate in Europe has also forced The Goodyear Tire & Rubber Company (NASDAQ:GT) to focus on North America, Middle East and Africa. The North American business is providing excellent returns to The Goodyear Tire & Rubber Company (NASDAQ:GT) and management expects to have positive cash flows in 2013 too.

The forward looking estimates:

Based on the analyst’s estimates, The Goodyear Tire & Rubber Company (NASDAQ:GT) tires is supposed to have the maximum annual growth among its peers followed by Bridgestone, while Cooper lags behind with 8.6% annual growth, which is lower than that of industry or sector growth. It is evident that the challenges lie ahead for Cooper. However, the synergy in acquisition might push the growth rates in the coming years.

In sum, the acquisition of Cooper seems to be a strategic move for Apollo, and it has paid a reasonable premium to Cooper based on the synergies. However, in order to create sustainable competitive advantage, the management team of both Apollo and Cooper will have to leverage their capabilities, strength of their brands, strategic decisions and good marketing.

Saurabh Mishra has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Saurabh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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