Goodyear Tire & Rubber (GT -2.17%) will further secure its position as the biggest tire maker in the U.S. after announcing it will acquire the nation's fifth-largest tire company, Cooper Tire & Rubber (CTB), for about $2.8 billion in a cash and stock deal.

The deal also nearly doubles Goodyear's presence in China, where sales of new cars and trucks are forecast to continue their recent surge.

Man putting a tire on a car

Image source: Getty Images.

Goodyear is paying $54.36 per share for Cooper, split between $41.75 in cash and 0.907 shares of Goodyear stock. The total is a 24% premium to Cooper's closing price last Friday and gives the combined company a $2.5 billion enterprise value with pro forma 2019 sales of $17.5 billion.

Goodyear shareholders will own about 84% of the new company, and it expects to realize $165 million in savings over the next two years because of the deal.

This is not the first time Cooper has attempted a merger. In 2013, India's Apollo Tyres tried to acquire Cooper for $2.5 billion. But Cooper's U.S. unions objected to the debt Apollo would saddle the company with, and one of its China divisions went on strike while the other sued over the merger.

When Cooper demanded Apollo abide by the terms of its union contracts, Apollo scoffed at the company not being able to control its various units and threatened to cut the size of the offer. Cooper ended up junking the deal.

China represents an opportunity for Goodyear as the country accounts for a quarter of its $1.75 billion in Asia region sales.

China analysts forecast car and light-truck deliveries will rise 7.5% to 21.7 million vehicles in 2021. Cooper's truck and bus radial tires are sourced from China, though it has begun producing them in Vietnam as well.