Cooper Tire & Rubber Company has reported the results of its long-awaited independent valuation of Cooper Chengshan (Shandong) Tire Company Ltd (CCT). The valuation, which is also the option price, was determined to be RMB 2.722 billion roughly US$440 million at the current exchange rate.
The figure is roughly equivalent to the $435 million Cooper said the company was worth in January 2014. In today’s announcement, Cooper reports that the valuation was completed by an independent firm responsible for “determining a fair market value for CCT on a stand-alone basis, excluding the value of trademarks and technologies licensed by Cooper to CCT.”
Under the option agreement announced 15 August 2014 between Cooper and Chengshan Group Company Ltd., upon delivery of the valuation, Chengshan has the first option to elect, within 45 days, to purchase Cooper’s 65 per cent interest in CCT for 65 per cent of the option price, to sell its 35 per cent interest in CCT to Cooper for 35 per cent of the option price, or not to exercise either of these options. If Chengshan determines not to exercise either the put or call option, Cooper has the right to purchase Chengshan’s 35 per cent interest in CCT for 35 per cent of the option price. In the event that neither party elects to purchase the other’s interest in CCT, the option agreement provides that the joint venture will continue as currently structured.
If Chengshan purchases Cooper’s stake in the joint venture, Cooper will continue to have offtake rights with CCT agreeing to produce Cooper-brand products, including truck and bus radial tyres, for a minimum of three years.
“We look forward to final resolution of the ownership of CCT as Cooper continues to pursue our growth plans for China,”said chairman, CEO and president Roy Armes. “Regardless of who owns CCT, Cooper is committed to continuing to build on the strong foundation we have in place in China by expanding our brand awareness and distribution network, and by growing profitable sales in the region through the original equipment channel and replacement tyre market,” Armes added.
