United States Rubber Company - Uniroyal Goodrich Tire

Uniroyal Goodrich Tire

In 1985, Uniroyal was taken private by its management and the New York investment firm of Clayton & Dubilier to prevent a hostile takeover by financier Carl C. Icahn. At the time, Uniroyal was the fifth-largest tire company in the country. To help pay the nearly $1 billion in debt incurred in the leveraged buyout, Avery Inc. purchased Uniroyal's Chemical subsidiary, a producer of agricultural chemicals, industrial chemical additives and specialized rubber and plastic products, for $760 million in May 1986.

The remaining tire operation was merged with that of B.F. Goodrich Company (NYSE: GR), a S&P 500-listed tire and rubber fabricator that made high-performance replacement tires. The joint venture partnership became the Uniroyal Goodrich Tire Company and B.F. Goodrich Company held a 50% stake in the new tire company.

The new Uniroyal Goodrich Tire Company established its headquarters at the former B. F. Goodrich corporate headquarters, within its 27-building downtown complex in Akron, Ohio which contained Goodrich's original factory. In the fall of 1987, B.F. Goodrich Company closed several manufacturing operations at the site, and most of the complex remained vacant until February 1988, when B.F. Goodrich announced plans to sell the vacant portions of the complex to the Covington Capital Corporation, a New York developer.

In 1987, its first full year of operation, the new Uniroyal Goodrich Tire Company generated almost US$2 billion in sales revenue, with profit of about US$35 million. However, the merger soon proved to be difficult. In June 1988, B.F. Goodrich sold its 50% stake to a group of investors led by Clayton & Dubilier, Inc. for US$225 million. At the same time, B.F. Goodrich also received a warrant to purchase indirectly up to 7% of the equity in Uniroyal Goodrich Tire Company.

Also in June 1988 as part of the sale deal, the new privately held tire company acquired publicly held debt of $415 million. The Uniroyal Goodrich Tire Company offered the debt securities in two parts through underwriters led by Drexel Burnham Lambert Inc. The two instruments were a US$250 million issue of 14 ⅛% notes due in 1998, and a US$165 million issue of 14 ½% subordinated debentures due in 2000.

For the year 1988, Uniroyal Goodrich Tire posted sales revenue of US$2.2 billion, while profit declined to about a third of the prior year, less than US$12 million, which included an extraordinary credit of nearly US$2 million from the purchase of Canadian annuity pension obligations, and also a charge of over US$16 million from the June 1988 recapitalization resulting from the selloff by B.F. Goodrich.

Also in 1988, Michelin Group, a subsidiary of the French tire company Michelin et Cie (Euronext: ML) proposed to acquire the Uniroyal Goodrich Tire Company, and began acquiring a stake.

In 1989, Uniroyal Goodrich Tire Company posted sales revenue that was up to almost US$2.3 billion, but profit was down by 90% to just over US$1 million, but included over US$9 million extraordinary credit that year for the ongoing Canadian annuity pension obligation purchase. 1989 year-end net income results were also hurt by increased interest expense of nearly US$31 million on the June 1988 debt recapitalization, and a US$29 million charge for deferred employee compensation related to the proposed purchase of the company by Michelin Group.