Goodyear Tire & Rubber has agreed to add three new board members and set up a strategic and operational review panel in a deal with activist fund Elliott Investment Management.
On Tuesday, Goodyear announced the appointment of Joseph Hinrichs, CEO of railroad company CSX, Max Mitchell, head of aerospace and defense supplier Crane, and Roger Wood, former co-CEO of auto-parts maker Tenneco. Mitchell and Wood will also join a newly established strategic and operational review committee, chaired by Goodyear CEO Richard Kramer, the tyre company added.
The changes are part of a cooperation agreement with Elliott, which in exchange agreed to customary standstill and voting provisions that bar the activist from running a proxy contest in the next 12 months. Elliott also pledged to keep its Goodyear stake below 10% and its economic exposure below 15%.
Shares in Goodyear were down 6% at $14.97 as of 11:50 a.m. Tuesday in New York, giving the iconic tyre manufacturer a market value of $4.2 billion.
In May, Elliott revealed a 10% economic exposure to Goodyear and called on the company to add five new board members, monetize its store network, and review its expenses to boost profits. The measures and others could unlock more than $21 per share in value for Goodyear shareholders, said the activist in a May 11 letter. Goodyear shares jumped more than 21% that day to close at $14.23 each.
Elliott argued Goodyear should sell its 1,000-plus retail stores, which the activist estimated to be worth close to Goodyear’s unaffected market capitalization, and use the cash to pay down debt.
“We have been encouraged by Goodyear’s openness to taking actions necessary to realize its full potential,” said Elliott Senior Portfolio Manager Marc Steinberg and Portfolio Manager Austin Camporin in a statement Tuesday.
With the three new additions, Goodyear’s board has 15 members, 13 of whom are independent, the company said. Goodyear intends to nominate up to 12 candidates for next year’s board elections, including the three new directors backed by Elliott.
In March 2019, Insightia reported that Goodyear was increasingly vulnerable to activism, especially in terms of capital allocation and corporate governance reforms.