Firestone, Bridgestone Announce Joint Venture
CHICAGO (AP) _ Firestone Tire & Rubber Co. said Tuesday it planned to spin off its worldwide tire business into a $1.5 billion joint venture to be 75 percent owned by Tokyo-based Bridgestone Corp.
Firestone said the transaction, which must be approved by its shareholders, was expected to result in a $1 billion cash distribution to Firestone shareholders as part of a major financial restructuring, according to a joint statement.
The company also said its board of directors adopted a ″poison pill″ takeover defense.
Firestone stock soared $9.25 to $45 a share in New York Stock Exchange trading following the disclosures.
The surprise announcements came amid speculation that Firestone would sell its Akron, Ohio-based tire division to the Italian tire manufacturer Pirelli SpA.
According to the trade publication Rubber & Plastics News, Firestone was the world’s fifth-largest tire company in terms of sales, with 1986 tire sales of $2.3 billion.
Firestone posted total profit of $103 million and revenue of $3.8 billion in the year ended Oct. 31, 1987.
The tentative agreement with Bridgestone calls for Firestone to transfer tire assets and liabilities with an equity value of about $1.5 billion to the joint venture.
The venture would be financed initially with $750 million in equity from Bridgestone, $250 million from Firestone and $500 million in debt, the statement said.
Bridgestone would own about 75 percent of the company, and Firestone 25 percent, the statement said.
The two companies plan to operate the joint venture, which will be known as the Firestone Tire Co., as ″a relatively autonomous business unit, subject to the direction and control of a board of directors consisting of persons representing the owners,″ the statement said.
Firestone spokesman Robert Troyer said the company would retain its 1,500 car care centers; Firestone Diversified Products, which includes divisions that manufacture industrial and building products; Firestone Synthetic Rubber and Latex Co., which manufactures synthetic rubber and operates a rubber plantation in Liberia, Africa; and Firestone Car Rental Inc.
Troyer said the tire division employs 30,000 people worldwide while the rest of Firestone’s businesses employ 23,500.
The joint venture would be based in Akron, Ohio, and would be assigned the exclusive right to use Firestone’s name on tires throughout the world.
The tentative agreement also calls for the joint venture to arrange contracts for raw materials with Firestone’s remaining businesses and to supply tires to its car care centers.
In a related move Tuesday, Firestone’s board adopted a ″poison pill″ anti-takeover plan to guard against unfriendly suitors.
The plan would take effect if any person or group buys 20 percent or more of Firestone’s common stock without board approval. The company said the plan was ″intended both to ensure that Firestone’s shareholders will retain the benefits of a joint venture with Bridgestone and to protect the full value of its shareholders’ investment in the company.″
Weekend news reports in Rome and Milan, Italy, quoted Pirelli officials as saying their company had the financial strength to acquire Firestone and added that Pirelli representatives had visited Firestone’s world headquarters in Chicago last week.
″I have no comment on the Pirelli deal,″ said Firestone spokesman Robert Troyer. ″That story was based on rumor, and I have no comment on rumors.″
The announcement on the Bridgestone deal came as Firestone’s board met in Chicago for a regularly scheduled session.
Firestone is the third-largest tire manufacturer in the United States, behind Goodyear Tire & Rubber Co. and Uniroyal Goodrich Tire Co.
In previous interviews, Firestone Chairman John J. Nevin had acknowledged the company might withdraw from the tire business.
Firestone structured the tire business as a freestanding unit last November when its corporate staff moved from Akron to Chicago. The company will seek shareholder approval next month to change its name to Firestone Inc. It was not immediately known if shareholders would be asked to approve the joint venture at that meeting.