Pirelli To Buy Armstrong Tire
Apr. 18, 1988
NEW HAVEN, Conn. (AP) _ Armtek Corp. said Monday it has agreed to sell its Armstrong Tire Co. for $190 million in cash to the Pirelli Group, one of Europe's largest tiremakers.
Pirelli had sought last year to acquire 80 percent of Armstrong Tire, but the talks ended after the two companies could not agree on the value of the proposed buyout, Armtek officials said.
This time around, Armtek and Pirelli said they signed a binding agreement for the sale of 100 percent of Armstrong Tire.
The sale will enable Armstrong's customers and employees to ''enjoy the benefits of being part of a far stronger competitor in the worldwide tire industry,'' said Frank R. O'Keefe, chairman and chief executive of Armtek.
Ludovico Grandi, president of Pirelli's worldwide tire operation, said Pirelli will benefit from Armstrong's ''excellent aftermarket distribution and efficient production facilities.''
The transaction is subject to approval by Armtek's board, which meets Tuesday, and is expected to close by May 31.
Pirelli Societe Generale SA of Milan, Italy, recently lost out to Japan's Bridgestone Corp. in a bid to purchase Firestone Tire & Rubber Co.
Pirelli will be acquiring Armstrong's three tire manufacturing plants in Des Moines, Iowa; Hanford, Calif., and Nashville, Tenn., and its tire chord and fabric manufacturing facility in Laurel Hill, N.C.
An Armstrong tube plant in Little Rock, Ark., is not being sold, although Pirelli has expressed an interest in acquiring it later, said John N. Sievers, Armtek's director of corporate planning.
Armstrong Tire, founded 75 years ago, employs about 2,700 people. The company supplies the majority of all passenger and light-truck radial tires sold by Sears Roebuck and Co., its largest customer for more than 50 years. It is also one of the leading suppliers of farm tires.
Sievers said that in all likelihood, proceeds from the sale will be used to reduce Armtek's outstanding debt. Long-term debt was about $300 million at the end of the first quarter, he said.
Armtek is also the parent company of Dayco Products Inc., a supplier of engineered drive systems, including automotive and industrial belts and hoses; Blackstone Corp., a maker of heat exchange systems and components, and Copolymer Rubber & Chemical Corp., a producer of specialty polymers.
All three companies have ''some exciting growth prospects,'' Sievers said, adding the sale of Armstrong Tire will enable Armtek to make some additional acquisitions.
''We will not stray at all from our automotive focus,'' Sievers said.
Pirelli has agreed, as part of the sale, to purchase raw materials from Copolymer Rubber & Chemical on a long-term basis, Sievers said.
The sale of Armstrong to Pirelli follows a general trend of consolidation in the tire industry brought on by the widespread use of radial tires, which do not need to be replaced frequently.
Buffeted by both domestic and foreign competition, Armtek had been reducing its reliance on the tire business in recent years.
In 1980, 90 percent of the revenues of Armstrong Rubber Co., now known as Armtek, came from the tire business. By the end of the 1987 fiscal year, that segment accounted for only 38 percent of its revenues.