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What: Shares of tire maker Cooper Tire & Rubber (NYSE: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.
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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.
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