Goodyear is in the throngs of a turnaround plan undertaken after the company racked up net losses of $2.3 billion between 2001 & 2003. They will soon start making a second attempt to sell non-core businesses and its $1.2 billion-in-sales engineered products operation is ticketed to be the first one marketed, according to sources.Goodyear canceled the sale of its rubber chemicals business and hasn't sold any significant assets despite promising to do so to pay down debt and heavy pension obligations. The company put rubber chemicals on the block in mid-2003 but decided in July to keep it. It didn't seem to have much choice; interested buyers were wary of that divestiture because Goodyear itself was its biggest customer, generating more than half its revenues.One source said Akron, Ohio-based Goodyear is targeting its engineered products business, which makes hoses and conveyor belts, for a sale process to start in January. Goodyear hired J.P. Morgan Chase & Co. for the assignment, the source said."To maximize shareholder value, the company evaluates from time to time its business portfolio, but we don't speculate or comment on that process," said Skip Scherer, spokesman for Goodyear's engineering products business."Stuff is going to start coming loose at Goodyear soon," said one source at a private equity firm.It's unclear what kind of a price buyers would pay for the business. One analyst, Morningstar Inc.'s Philip Guziec, figures a multiple of 0.5 or 1 times sales, or $600 million to $1.2 billion.Goodyear's hoses are used for everything from pumping gas to washing commercial spaces, while its conveyor belts can be found everywhere from mines to the supermarket checkout counter.Now may be a good time to sell the engineered products unit because it's at a high point in its business cycle, Guziec said.The engineered products unit is small compared to the rest of Goodyear, which generated more than $15 billion in revenues in 2003.The most interested buyers for engineered products are likely to be private equity firms, Guziec said.The business wouldn't necessarily bring a lot of cost synergies or other benefits to other companies, but its slow growth, steady cash flow profile suits financial buyers, he said.Even after refinancing billions of dollars in debt in 2003 and earlier this year, the company still faces major debt maturities in the next two years. About $1.2 billion comes due in 2005, and another $1.9 billion matures in 2006. In all, Goodyear has about $5 billion in debt on its books.In addition, the company must make $160 million in pension payments this year and $325 million to $350 million next year, according to the company's annual report.There's also speculation that the company may sell its 1,000 Goodyear stores, one banker said.One deal Goodyear has made was selling its rubber plantations in Indonesia to Bridgestone Corp. for an undisclosed sum in late November.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates,