The Goodyear Tire & Rubber Company GT recently signed a definitive agreement to sell the Dunlop brand, including trademarks and intangible assets necessary for its operations in Europe, North America and Oceania, to Sumitomo Rubber Industries, Ltd. (“SRI”). The sale, which encompasses consumer, commercial and other specialty tires, also involves the transfer of certain associated intellectual property.
This decision follows Goodyear’s strategic review of the Dunlop brand as part of its Goodyear Forward transformation plan. Under the terms of the agreement, SRI will pay GT approximately $701 million at closing, covering the transfer of the brand, a Transition Fee to support the transition process and the purchase of Dunlop tire inventory. Additional provisions include ongoing licensing, offtake agreements and other collaborative arrangements.
Per Mark Stewart, CEO and president of Goodyear, optimizing the portfolio and reducing leverage aligns with Goodyear's goal of driving long-term shareholder value while sharpening the focus on its core brands. The transaction, which is subject to regulatory approvals, customary closing conditions, and consultations, is expected to close by mid-2025. Goodyear plans to use the proceeds from the sale to reduce debt and fund initiatives associated with the Goodyear Forward transformation plan.
Goldman Sachs & Co. LLC is serving as the lead financial advisor to Goodyear, while Barclays Capital Inc. is serving as an additional financial advisor, and Cleary Gottlieb Steen & Hamilton LLP is providing legal counsel.
Goodyear will receive the payment from SRI in three parts. The first component is $526 million for the Dunlop brand and its related intellectual property. The second is a $105 million Transition Fee for Goodyear's support in transitioning the brand and associated intellectual property, as well as assisting with customer transition and logistical planning. The third component is the sale of Dunlop tire inventory, estimated at $70 million, with the final amount to be confirmed before closing.
As part of a Transition License Agreement (TLA), Goodyear will continue to manufacture, sell and distribute Dunlop-branded consumer tires in Europe until at least Dec. 31, 2025, with a potential one-year extension. During this time, GT will pay SRI royalties on sales but retain all profits. The transition period is intended to allow SRI to scale its operations and ensure continuity for existing customers.
After the TLA expires, Goodyear will supply certain Dunlop tires to SRI in Europe for five years under a Transition Offtake Agreement (TOA), which guarantees minimum purchase quantities of 4.5 million tires annually. SRI may terminate the TOA early after three years, subject to a termination fee. Goodyear will also license back Dunlop trademarks for commercial truck tires in Europe, paying royalties on sales while retaining the right to terminate the agreement at any time.
In 2023, Dunlop consumer tire sales totaled $532 million, with commercial tire sales and specialty tire sales contributing $201 million and $22 million, respectively. Goodyear will retain rights to the Dunlop trademarks for motorcycle tires in Europe and Oceania. The company does not anticipate the transaction to significantly affect segment operating income during the TLA period. However, after the TLA, Goodyear expects an annual reduction in operating income of $65 million during the TOA term, though this estimate excludes potential cost savings from debt repayment and other strategic actions.
GT currently carries a Zacks Rank #4 (Sell).
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