Goodyear Sells Dunlop Tire Brand to Japan's Sumitomo Rubber Industries
Akron, Ohio based Goodyear Tire & Rubber has announced a definitive agreement to sell the Dunlop brand to Japanese conglomerate Sumitomo Rubber Industries (SRI) in a complex deal that is said to be worth initial gross cash proceeds of $701m plus a matrix of brand and segment cross licensing agreements and income streams.
The deal comprises trademarks and intangible assets necessary for operations of the brand business in Europe, North America and Oceania for consumer, commercial and other specialty tires; together with certain associated intellectual property. This is far from being SRI and Goodyear's first dealings involving the Dunlop brand.Indeed, the two have a complex and not always harmonious history where Dunlop is concerned. The Sumitomo portfolio of tire brands already includes Dunlop (in certain regions of Asia, Africa, and Latin America), with SRO also manufacturing and selling sells sport equipment under the Dunlop Sport brand.
The company traces its origins to 1909, when the Sumitomo Group made an investment in Dunlop Japan, the newly formed Japanese subsidiary of the then British company Dunlop Rubber. Over the years Sumitomo and Dunlop developed a close business relationship, and in 1963 the Sumitomo Group acquired control of Dunlop Japan and renamed it Sumitomo Rubber Industries Ltd.
From the Goodyear perspective, the sale of the Dunlop Brand follows a previously announced strategic review of the brand in connection with their 'Goodyear Forward' transformation plan. SRI is paying Goodyear for the transfer of the Dunlop Brand across the relevant geographies and the purchase of Dunlop tire inventory. The transaction also provides for a complex matrix of additional ongoing 'offtake', licensing and other balance sheet driven arrangements.
"This is another important milestone as we continue to execute against our 'Goodyear Forward' transformation plan," said Mark Stewart, Goodyear Chief Executive Officer and President. "We are optimizing our portfolio and reducing leverage [meaning debt] to drive sustainable and substantial shareholder value creation. Not only does the transaction deliver significant value for our shareholders, it better positions Goodyear to enhance our focus on the growth of our core brands."
It is less than four years since Goodyear acquired its smaller Ohio rival Cooper Tire & Rubber. With that acquisition Goodyear found itself owning Avon Tyres, the iconic and then 120 year-old British manufacturer. Avon's historic UK factory was shuttered at the end of 2023 and this announcement makes no mention as to whether Goodyear still sees a role for the Avon brand of motorcycle tires in its transformation plan.
The announcement does though cite Dunlop's motorcycle tire business as a segment that Goodyear appears intent on retaining, one way of another. Only $526m of the $701m that SRI is to pay to Goodyear is actually for the Dunlop Brand and certain associated intellectual property; the balance is largely brand transition activity and related arrangements, including around $70m for existing Dunlop consumer tire inventory at an agreed markup.
Goodyear will continue to manufacture, sell and distribute Dunlop branded consumer tires in Europe, at least through the end of 2025, and will pay a royalty to SRI but retain all profits from these sales.
Following the completion of the transmission agreement, Goodyear will supply certain Dunlop branded tires to SRI in Europe for a five-year period - subject to a minimum of 4.5 million tires per year being purchased for the five-year term, on a take-or-pay basis.
The collateral details and fine print surrounding this complex deal between Goodyear and SRI appears to suggest a degree of distrust that likely is still a legacy of the collapse in relations between the two seen in 2015.
In 1997, SRI and Goodyear joint ventured manufacturing tires for each other's markets, including Dunlop branded tires. As part of the agreement, Goodyear acquired 75% interests in Dunlop Tyres, the UK company which Sumitomo had formed, and in Dunlop Tire Corporation. Goodyear and SRI also made investments in each other.
On 14 February 2014, Goodyear announced its intention to dissolve its partnership with SRI due to alleged "anticompetitive conduct". The JV ended in 2015 with the Dunlop brand being shared between the two companies ever since.
Goodyear will license back the Dunlop trademarks from SRI for commercial (truck) tires in Europe on a long-term basis, subject to a royalty on sales.
Dunlop consumer tire sales totaled $532m in 2023. Dunlop commercial tire sales totaled $201m in the same period. Other specialty Dunlop tire sales (excluding motorcycle) totaled $22m.
Goodyear will retain its rights to the Dunlop trademarks for its motorcycle tire businesses in Europe and Oceania. SRI will hold rights to the Dunlop brand for new motorcycles (and cars) made by Japanese manufacturers. Other SRI tire brands include Falken and Ohtsu.
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