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Goldsmith Drops Goodyear Bid, Will Sell Back His Stock

November 21, 1986|DENISE GELLENE | Times Staff Writer

British financier Sir James Goldsmith on Thursday withdrew his controversial $4.7-billion takeover bid for Goodyear Tire & Rubber Co. and agreed to sell his 11.5% stake back to the company for about $630 million.

The agreement ends an intense battle for the nation's leading tire maker that became the focus of a congressional hearing earlier this week, and of anti-takeover legislation in Ohio, Goodyear's home state. It also gives Goldsmith's investment group a $75-million profit on the shares it accumulated in less than a month.

Goodyear also said Thursday that it is expanding a previously announced share-repurchase program in an effort to boost its share price and that it is going ahead with plans to sell its aerospace, motor wheel and oil and gas businesses.

The company said it will repurchase 40 million of its 109 million common shares for $50 apiece, or 50 cents more a share than it is paying Goldsmith. Analysts said the entire share-repurchase program will force Goodyear to borrow about $2.6 billion, heavily boosting company debt.

$2-Billion Price Forecast

However, Goodyear could probably recover about $2 billion of that from the sale of its businesses, analysts said. The aerospace business that is for sale manufactures the company's well-known blimps.

Goodyear's shares were the most actively traded issue Thursday on the New York Stock Exchange, rising $1.25 to close at $43. The company earned $412.4 million on sales of $9.6 billion in 1985.

Goldsmith said in an interview that his investment group probably made $75 million on the deal, with about $30 million of the profit going to his partnerships. Despite the hefty profit, he said, "I consider it a defeat. It was our purpose to carry out the reorganization of the company."

The businesses that Goodyear now plans to sell are those identified for disposal by Goldsmith in his takeover plan. His $49-a-share bid for Goodyear became the subject of a House subcommittee on monopolies and commercial law hearing Tuesday. During that hearing, Goldsmith contended that Goodyear's management had led the company astray by diversifying into energy and other businesses unrelated to tires.

Takeover Curbs Demanded

His remarks drew an angry response from members of the committee and a plea from Goodyear Chairman Robert E. Mercer for curbs on takeover activity.

Fueling that anti-takeover sentiment was a widening insider trading scandal in which professional stock speculator Ivan F. Boesky last week agreed to pay $100 million in illegally obtained profits and fines.

Mercer told the House subcommittee that he believed Boesky owned a large block of Goodyear shares, but Goldsmith said he had not been in touch with Boesky.

"The climate could not have been worse" to attempt a takeover, Goldsmith said on Thursday.

He added that anti-takeover measures under consideration by the Ohio Legislature played a major role in his giving up his bid for Goodyear. He said his advisers told him the Legislature would probably approve the measure, which could reduce the value of his investment by allowing Goodyear to immediately issue new shares.

Goldsmith said also that Goodyear's proposed restructuring would eventually increase the value of Goodyear's shares to a range of $50-$60 a share, more than Goldsmith was willing to offer for the company.

"We said repeatedly that if they could reconstruct the company so that the value to shareholders would be more than $49 a share, we would be supportive," he said.

As part of his agreement, Goldsmith promised not to buy Goodyear shares for five years.

Mercer, in an emotional letter to Goodyear employees, said the restructuring would increase the value of the company's shares and remind "our nation that staying competitive . . . required something more than leaving American industry vulnerable to sneak attacks on the stock market."

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