The Firestone Tire and Rubber Co., the nation's second-largest tire manufacturer, yesterday agreed to transfer its worldwide tire business to a joint venture with the Bridgestone Corp. of Japan for an estimated $1 billion.
Bridgestone would control 75 percent of the joint venture and Firestone would retain a 25 percent interest under the arrangement. Analysts described the deal as part of a continuing globalization of the tire business that has been marked by several recent international mergers and joint ventures. Firestone would retain its other businesses, including auto service and chemicals, analysts said.
Bridgestone, Japan's leading tire maker, has a 2 percent share of the U.S. market for replacement automobile tires. It is America's fourth-largest maker of truck tires, which are produced in a Tennessee plant Bridgestone bought from Firestone.
The Firestone-Bridgestone deal offered new evidence of an anticipated increase in foreign purchases of U.S. companies. Overseas investors have cash to invest, the stocks of U.S. companies are relatively cheap and the dollar is at near-record lows in trading against major foreign currencies. "They have the best of all possible worlds," said Nimrod Fachler, head of the PaineWebber Atlas Fund.
Firestone's agreement with Bridgestone followed speculation that Firestone might sell its tire division to Pirelli SpA, an Italian tire manufacturer. Italian newspaper reports said Pirelli offered $1 billion for Firestone's tire division.
Tire industry analyst Harvey Heinbach of Merrill Lynch in New York, said, "I assume that Firestone had been talking with Pirelli as well as with Bridgestone and went where they felt they were getting a better deal."
Firestone stockholders, who must approve the arrangement, are expected to receive what the company called "a very substantial portion" of the proceeds of the deal.
Richard A. Henderson, vice president of research at Pershing & Co., New York, said he estimated shareholders would get about $750 million or nearly $23 a share, making the stock worth about $45 to $55 a share, he said.
Firestone stock moved up to $45 a share, an increase of $9.25.
Analyst James L. Alexandre of Donaldson, Lufkin & Jenrette Securities, New York, said the deal between Firestone and Bridgestone "fits in with a trend toward the international consolidation in the tire and rubber industry."
General Tire Inc. was sold to Continental AG of West Germany; Sumitomo Rubber of Japan acquired an interest in Dunlop Tire Corp. and Pirelli tried to enter a joint venture with Armstrong Rubber, now called Armtek Corp.
The third-largest U.S. supplier of tires for new cars, after Goodyear Tire & Robber Co. and Firestone, is Uniroyal Goodrich Tire Inc., formed in a 1986 merger of two longtime U.S. tire producers.
Bridgestone was motivated to make the deal with Firestone, Alexandre said, because "it is vital for global tire manufacturers to have access to their markets." The joint venture, he said, will make it possible for Bridgestone to follow its customers, such as Toyota, which now manufactures in America. Toyota is one of Bridgestone's key customers.
Henderson said the spinoff of Firestone's tire division was in line with Firestone Chairman John Nevin's desire to concentrate on the faster-growing areas of Firestone's business, such as the retail auto service business and chemicals and plastics.
Firestone sales in fiscal 1987 totaled $3.9 billion of which $2.6 billion, or 68 percent was the tire business, said Henderson.
"Theoretically, this would be a win-win situation for both Firestone and Bridgestone," said Henderson. Firestone, he said, gave up its control of a business that it wanted to deemphasize. And Bridgestone got the market it wanted for its products.
Firestone said it would transfer its Akron, Ohio-based worldwide tire business worth $1.5 billion to the joint venture, for about $1 billion in cash. The details of that payment were not disclosed. The companies said the joint venture would be financed with $750 million from Bridgestone, $250 million from Firestone and $500 million in debt issued by the joint venture, the statement said.
Firestone also announced it had adopted a "poison pill" provision in its corporate bylaws in an effort to prevent a hostile takeover.
The tire division employs 30,000 people worldwide while the other divisions of Firestone employ 23,500.