Hong Kong (CNN Business)Goodyear (GT) has agreed to buy rival Cooper (COO) for $2.8 billion. The deal will give America’s largest tire producer a much bigger footprint around the world, including in China, the world’s top car market.
Goodyear was already the world’s third largest tire manufacturer after Japan’s Bridgestone (BRDCY) and France’s Michelin. It will retain that spot after the deal, though its global annual sales total will rise to some $15 billion from the $12.3 billion that Goodyear currently makes.China's auto market just snapped a 21-month slump. But car sales are still direThis purchase, though, is particularly significant for how much traction it gives Goodyear in China, which together with the United States accounted for about a third of the global production of tires in 2019. China is also the world’s largest car market, and an increasingly attractive destination for players in the auto industry to put down roots. “In China, the combination nearly doubles Goodyear’s presence and increases the number of relationships with local automakers,” the companies said in a statement.Shares of Goodyear and Cooper both soared Monday after the news. They each finished the day up more than 20%.Read MoreUS tire shipments were estimated to reach 333 million units in 2019, according to the US Tire Manufacturers Association. China made about double that amount that year, according to the China Rubber Industry Association.While Goodyear and Cooper are the two largest tire producers in the United States, they lag behind rival manufacturers in market share and brand recognition in China.Michelin, (MGDDY) which made an early entry into China, accounts for about 12% of original tires fitted on new cars, according to an estimate by Shenzhen-based Great Wall Securities at the end of 2019. Michelin also ranked as the top brand last year in that segment, followed by Italy’s Pirelli and Japan’s Bridgestone, according to a list compiled by China Tire Dealer, an industry publication.Americans are buying cars againThe companies also said that the deal “further strengthens Goodyear’s leading position in the [United States], while significantly growing its position in other North American markets.”Goodyear will pay Cooper’s shareholders in both cash and stocks and fund the cash portion through debt financing.The transaction is expected to close in the second half of this year, the company said.