The ink is barely dry on the deal for Cooper Tire & Rubber Co.'s acquisition of Standard Products Corp. and already Cooper is weighing options for its new plastics division. "We will either need to grow that business or dispose of it," said Roger Hendriksen, Cooper's director of investor relations.
Cooper, of Findlay, Ohio, announced Feb. 8 that it has retained an investment banking firm to "explore strategic options" for the division and provide recommendations for growth, reducing debt and improving the company's foundering stock price, according to Hendriksen.
The Oct. 27 purchase of Standard Products tossed Cooper into the plastics world via refrigeration sealing components and custom extruded automotive parts.
Cooper paid $757.4 million for Dearborn, Mich.-based Standard Products, a figure that includes $173 million in assumed debt. At the time, Thomas Dattilo, Cooper's president and chief operating officer, said the plastics division probably would be expanded once the acquisition was completed.
Hendriksen said that still is an option. If Cooper keeps the division, it will have to be expanded for the firm to compete globally, he said.
Some analysts predict Cooper will divest some or all of its plastics business. Because plastics is a completely different animal than rubber, it would make sense to get rid of the plastics operations, said Dennis Virag, president of Automotive Consulting Group Inc. of Ann Arbor, Mich.
Glen Curtis, senior equity analyst for InsiderTrader.com in New York, agreed, noting Cooper's steadily declining stock.
"They have to do something" to recoup shareholder value, he said.
Cooper's stock closed Feb. 9 at a 52-week low of $11.875, down from a high of $25 in June.
Cooper experienced a growth spurt last year when it bought Dean Tire, Standard Products and Siebe Automotive, but those acquisitions significantly increased Cooper's debt, Virag noted, adding that spinning off the noncore businesses could help reduce that debt.
Hendriksen acknowledged: "We do have more debt than we've ever had before and we do intend to pay down that debt rather quickly."
Cooper has 11 U.S. plants and four overseas that make plastics. The firm reported $4 billion in sales last year, including about $215 million for the plastic unit.