Carlyle buys Goodyear unit for $1.5b

Troubled North American tyre manufacturer Goodyear Tire & Rubber Co. has agreed to sell its Engineered Products division to The Carlyle Group.

The Carlyle Group has augmented its array of automotive-related portfolio companies with its $1.5 billion (€1.1 billion) acquisition of Goodyear Tire & Rubber’s Engineered Products division.

Engineered Products manufactures and markets products including hoses, conveyor belts, and power transmission products for industrial, military and consumer applications. The division has 32 facilities in 12 countries, and employs approximately 6,500 workers.

Under terms of the agreement, Carlyle will also be licensed to use the Goodyear brand and certain trademarks in connection with the Engineered Products business. The transaction is subject to closing conditions, regulatory approvals, and a labor agreement with the US Steelworkers union. Carlyle was unable to provide an expected close date.

Sale of the Goodyear unit will help the beleaguered tyre manufacturer to reduce debt, address legacy obligations and support growth of its core business, said Goodyear chairman and chief executive, Robert Keegan, in a statement. Goodyear had said in January it expected to sell the engineered products business within the first half of the year.

This is the fourth auto industry-related portfolio company acquired by the Carlyle Partners IV fund, which closed in early 2005 on $7.8 billion and is more than 50 percent invested. In December 2005, the private equity firm bought US rental company Hertz; in November 2005 it purchased powertrain machining firm Diversified Machine; and in October 2005 it acquired axle maker AxleTech International Holdings.

Carlyle’s previous $3.9 billion fund, Carlyle Partners III, invested in several US auto- and transportation-related firms, including transportation service provider Grand Vehicle Works, power transmission manufacturer Rexnord, and auto parts manufacturer United Components.

Carlyle’s automotive and transportation group is a team of nine investment professionals, led by managing director Gregory Ledford. He joined the firm a year after its 1987 founding.

Washington, DC-based Carlyle manages $54.5 billion in capital, and has raised 48 funds between its buyout, venture-focused, real estate and leveraged financed vehicles. It is reportedly raising a $15 billion US-focused buyout fund, expected to launch when its predecessor is roughly 70 percent invested.