Bridgestone to buy US Tire Retreader for US$1.05bn cash

Japan's Bridgestone Corporation’s U.S. subsidiary, Bridgestone Americas Holdings Inc (BSAH) on Tuesday announced it has entered into a merger deal with Bandag Inc., a leading US manufacturer of tire retreading materials and equipment, under which it will acquire the latter for US$1.05 billion.

As per the terms of the deal, Bandag stockholders will receive US$50.75 per share in cash, 13 percent more than the common stock's closing price on Dec. 4.

“Bandag is a leader in the retreading business, with a strong global reputation for quality, service and technology, as well as an extensive worldwide dealer network,” said Mark A. Emkes, Chairman and CEO of BSAH.

Telling about the companies’ objective behind the merger, BSAH chairman said, “The joining of Bridgestone Americas and Bandag will allow the two companies to better service their customers by offering a comprehensive tire maintenance solution, backed by a complete line of new and retread truck tire offerings.”

Muscatine, Iowa based Bandag’s Board of Directors has unanimously given its node to the deal. Bandag, which had witnessed worldwide sales of US$921 million in 2005, has a network of 900 franchised dealers in more than 90 countries that produce and market retread tires and provide tire management services.

According to Bandag’s Chairman and CEO Martin G. Carver, their collaboration with Bridgestone Americas will benefit Bandag dealers and help boost their business prospects. “The transaction combines the strength of two well-run and respected companies, and will allow our dealers to go to market with an even more complete product offering,” he said.

The two companies expect the transaction to close late in the first quarter or early in the second quarter of 2007. Besides shareholder and regulatory approvals, the satisfaction of other customary closing conditions is still required.

"Retreading", a cost-effective manufacturing process widely used for truck and bus, aircraft, construction and off-highway tires. The process starts with a safety inspection of the tire. The old tread is then rubbed away to flatten the surface of tire, and a new rubber tread is applied to the bare "casing" using specialized machinery.

Retreading, which is viewed as the kernel of the whole tire management system, enables customers to get the full value of a new tire by reusing the tire’s casing again.

After acquisition of Bandag, Bridgestone will strengthen itself to compete with France's Michelin & Cie. and Goodyear Tire & Rubber Co. for sales of reconditioned tires.

Goodyear, the largest U.S. tire maker, offers truck-tire retreading services through its company-owned stores and dealers. It has 26.5 percent of the U.S. truck tire retreading business, and is in second place, followed by Michelin at about 12 percent, while Bandag tops with 45 percent.

Before the merger deal announcement, Bridgestone shares fell 0.8 percent to 2,465 yen in Tokyo trading. Shares of Bandag, which would become a subsidiary of Bridgestone Americas, were up $5.40 at $50.41 in afternoon New York Stock Exchange trade. Earlier the stock hit a two-year high of $50.59.