Goodyear Tire & Rubber Co. said Friday it plans to sell its engineered products unit to private equity firm Carlyle Group for $1.475 billion under a multiyear program to focus on its tire business.
The sale is subject to conditions that include regulatory approvals and Carlyle reaching a labor agreement with the United Steelworkers and other conditions, Goodyear said.
Carlyle also will receive rights to use the Goodyear brand and other trademarks connected with the division for 12 years and could extend that deal another decade, Goodyear said.
Carlyle said the business headquarters for the unit would remain in Akron, Ohio, and current management, including President and CEO Timothy Toppen, would remain in place.
The Goodyear division produces various rubber products, excluding tires, such as belts and hoses for automotive and industrial uses. It also makes conveyor belts, the tracks used on farm equipment and tanks, and molded rubber products.
The unit had revenue of $1.51 billion in 2006, including a big drop in fourth-quarter sales due to a strike by the United Steelworkers union in North America. It has about 6,500 workers and 32 facilities worldwide.
One of the world's largest private equity firms, Carlyle has $54.5 billion under management and investments in more than 185 companies. Investments in the automotive space have included Hertz Global Holdings Inc. and Beru AG.
The United Steelworkers represents workers at four Goodyear engineered products facilities in the United States and the union contract requires a buyer to reach new labor agreements before completing a sale, union spokesman Wayne Ranick said.
Goodyear, the largest U.S. tire maker, had planned for some time to sell the division and expected to reach a definitive agreement by the end of June. The company expects a gain on the sale, though that gain has not been finalized.
KeyBanc Capital Markets analyst Saul Ludwig had said in a note to clients Monday that a sale could be announced within a month and could top the $1 billion that had been widely expected by Wall Street.
Under the agreement, Akron, Ohio-based Goodyear would be entitled to a $50 million break-up fee if the agreement is terminated under certain conditions.
The company plans to use the proceeds from the sale to reduce debt and address benefit costs.
Goodyear is in a multiyear plan of plant closings, asset sales and other cuts aimed at improving operations in North America that have been under pressure from low-cost imports and high-wage and benefit costs.
The United Steelworkers strike cut into North American results in 2006, but ended with contracts that allow Goodyear to close a union tire plant and to create a trust to eliminate future company obligations for union retiree health care.
German auto parts supplier Continental AG had expressed a strong interest in the division and executives at Continental had expected Goodyear to make a decision on the sale of the unit some time in the first quarter.