Elliott Builds 10% Interest in Goodyear, Pushes for Review
Elliott Management Corp., the activist hedge fund run by billionaire Paul Singer, has built a 10% stake in Goodyear Tire & Rubber Co. and is pushing for a strategic review of the company.
The fund has been buying Goodyear shares since the beginning of the year and has been in contact with the company’s management, according to people familiar with the matter. Elliott is now the largest shareholder in the Akron, Ohio-based tire maker, the people said, asking not to be identified because the information is private.
Goodyear shares rose as much as 5.3% in premarket trading in New York on Monday.
Elliott’s Activism
Elliott has a long history of activism, pushing companies to make changes to boost their stock prices. The firm has been involved in some of the biggest corporate battles of the past decade, including a fight with Arconic Inc. that resulted in the ouster of its chief executive officer.
The fund has also taken on some of the world’s largest companies, including AT&T Inc., SoftBank Group Corp. and Samsung Electronics Co.
Goodyear’s Struggles
Goodyear has struggled in recent years, as the company has faced rising costs and competition from rivals such as Bridgestone Corp. and Michelin & Cie. The company has also been hurt by the pandemic, which has weighed on demand for tires.
Goodyear reported a net loss of $2.3 billion in 2020, compared with a profit of $1.2 billion in 2019. The company’s sales fell 11% to $15.2 billion last year.
Goodyear’s Response
Goodyear said in a statement that it is “committed to delivering value for all of our shareholders” and that it “regularly engages with shareholders to understand their perspectives.”
The company said it has taken steps to improve its performance, including cutting costs, reducing debt and investing in new products.
Elliott’s Proposal
Elliott is pushing for Goodyear to explore strategic options, including a potential sale of the company, the people said. The fund is also urging the company to consider a dividend or share buyback, they said.
The hedge fund has also suggested that Goodyear consider spinning off its tire business, which could unlock value for shareholders, the people said.
Goodyear’s Potential Buyers
Goodyear could attract interest from private equity firms and other tire makers, the people said. The company could also be an attractive target for Chinese tire makers, which have been looking to expand their presence in the U.S.
Goodyear’s Outlook
Goodyear is expected to report first-quarter earnings on May 13. Analysts are expecting the company to report a loss of $1.05 a share on sales of $3.3 billion.
The company is expected to benefit from higher tire prices and cost cuts, but the pandemic is still expected to weigh on its results.
Elliott’s Previous Involvement with Goodyear
Elliott has been involved with Goodyear before. In 2017, the fund pushed for the company to spin off its tire business, but the proposal was rejected by Goodyear’s board.
Elliott’s Influence
Elliott’s involvement could put pressure on Goodyear’s management to take action to boost the company’s stock price. The fund has a track record of pushing for changes at companies it invests in, and its involvement could lead to a shakeup at Goodyear.