Why Cooper Tire & Rubber's Shares Jumped


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of tire maker Cooper Tire & Rubber (NYS: CTB) rose as much as 11% in early trading after rumors swirled that the company would get a buyout offer.

So what: The Economic Times is reporting that Apollo Tyres, the largest tire maker in India, is prepared to make a bid to acquire the company or pay $600 million to $800 million for a controlling stake. The $600 million price for half of the company would put the offer near today's price, an unattractive offer for shareholders or the board. Even at the high end, the offer isn't much of a premium.

Now what: I'm always skeptical of buyout rumors, and this one just doesn't seem to smell quite right. The premium being talked about isn't very attractive, and Apollo is actually a smaller company, so it's unknown how they would finance the deal.

Cooper Tire is trading at a relatively cheap multiple, which should intrigue investors, but I wouldn't be buying on rumors alone. I'd stay long if I were a shareholder, but wouldn't hold my breath for the buyout to come to fruition.

Interested in more info on Cooper Tire & Rubber? Add it to your watchlist by clicking here.

The article Why Cooper Tire & Rubber's Shares Jumped originally appeared on Fool.com.

Fool contributor Travis Hoium has no positions in the stocks mentioned above. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.