Goodyear Tire Reaches Agreement With SRI To Dissolve Global Alliance

(RTTNews) - Tire manufacturer Goodyear Tire & Rubber Company (GT) announced that it has reached an agreement with Sumitomo Rubber Industries, Ltd. or SRI to dissolve the global alliance between the two companies.

The global alliance was formed in 1999 and it primarily consists of four joint venture operating companies, one each in North America and Europe, and two in Japan.

The agreement, when closed, would resolve the pending arbitration filed in January 2014. The agreement enables both companies to avoid the cost and uncertainty of the arbitration process.

As per agreement terms, Goodyear will pay SRI $271 million upon closing of the transaction, which is expected in the fourth quarter of 2015. The transaction does not impact the company's existing 2015 and 2016 financial targets or capital allocation plan.

The outlay is included in the approximately $600 million designated for restructurings under the capital allocation plan. In addition, Goodyear will repay a pre-existing debt of approximately $55 million to SRI within three years from the date of closing. As a result of the agreement, Goodyear will also sell its 3.4 million shares of SRI common stock.

Goodyear said it expects the transaction to be accretive to its earnings beginning in the first quarter of 2016, related mainly to the elimination of minority interest in GDTE. Based on the company's 2015 operating plan, the annual benefit to adjusted net income would be approximately $40 to $50 million or 15-18 cents per share.