Cooper Tire & Rubber Company (NYSE: CTB) today announced it has signed an agreement with Chengshan Group Company Ltd. and the CCT labor union establishing a path forward for the Cooper Chengshan (Shandong) Tire Company Ltd. (CCT) joint venture.
The agreement establishes a process for determining the future ownership of CCT, which begins with engaging an independent valuation firm to determine the fair market value of CCT. Once a valuation is established, Chengshan will have the first option to either purchase Cooper’s 65 percent interest or to sell its 35 percent interest to Cooper, making CCT a wholly-owned subsidiary of Cooper. If Chengshan determines not to exercise either of these options, Cooper has the right under the agreement to purchase Chengshan’s 35 percent interest. The options are conditioned on Cooper reporting its financial results within a specified timeframe. In the event that neither party elects to purchase the others’ interest, the agreement allows for continuation of the joint venture as currently structured.
The agreement further stipulates that should Chengshan purchase 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 (TBR) tires, for a minimum of three years.
The agreement also confirms that, with the support of the labor union and Chengshan, normal operations will be sustained at CCT including the production of Cooper brand products and access to financial and operational data that will allow Cooper to resume regular financial reporting.“With this agreement, Cooper gains certainty regarding sustained normal operations at CCT as well as a defined process for determining the long-term ownership of the joint venture based on a fair market value,” said Cooper Chairman, Chief Executive Officer and President Roy Armes. “If Cooper sells its interest in CCT to Chengshan, the commercial offtake rights secure a future supply of product for our customers. Cooper will also have added flexibility to enter into acquisitions, new offtake relationships, or possible greenfield development of additional production capacity anywhere around the world to support the expansion of our TBR business. If Cooper buys Chengshan’s minority interest in CCT, we will have the certainty of a wholly-owned asset with an experienced team in place that will continue our China growth strategy,” Armes added.