Bridgestone Nearing U.S. Deal, Narrows List to a Few Candidates

(Bloomberg) -- Bridgestone Corp. is on track to restore quarterly sales close to pre-pandemic levels in despite a global chip shortage, paving the way for a merger or acquisition this year, Chief Executive Officer Shuichi Ishibashi said.

Demand is strong in the U.S., where Japanese tiremaker has narrowed its list of potential acquisition targets to a few information-technology firms, Ishibashi said in an interview Tuesday. Asked whether Bridgestone would upgrade its outlook, the CEO said that while he’s not supposed to comment ahead of an earnings announcement in May, it’s clear that the company is on a recovery path.

Bridgestone, which is pushing into fleet management and connected car services, paid 910 million euros ($1.1 billion) for the telematics unit of Dutch navigation company TomTom NV in 2019. The next acquisition will probably be smaller than that, the CEO said. Asked about companies in North America with a business similarto TomTom, Ishibashi mentioned Geotab Inc., a Canadian provider of fleet-management software, but didn’t indicate whether they were in discussions.

“The new and used car markets in the U.S. are doing very well,” Ishibashi said. “Demand is strong in the U.S. and China, two of the biggest auto consumers, and inventories are tight.”

Automakers have explained to Bridgestone that plant halts due to a global chip shortage won’t last long and that production will recover in the latter half of the year, the CEO said. That’s causing tighter inventories for U.S. auto dealers. Although carmakers are trying to restore inventory levels, that’s probably not going as planned with the current semiconductor shortage, he said.

The tiremaker plans to invest 700 billion yen ($6.5 billion) by 2023, with half being used for its growth strategy and restructuring, and the other half for partnerships, venture investing and merger and acquisitions, the CEO said. In April, Bridgestone said it will invest 10 billion yen in Japan’s Shimonoseki plant to renew its equipment.

As a chair of an M&A team, comprised of five to six members, Ishibashi has said no to several plans, including solution businesses since the start of this year. It’s crucial to scrutinize whether a plan is financially sensible and what returns they’d get, he said.

Bridgestone hasn’t always been aggressive in making deals in a bidding race. In 2015, then-CEO Masaaki Tsuya walked away from a bidding war with billionaire Carl Icahn over Pep Boys-Manny Moe & Jack, a U.S. auto parts and repair chain. The acquisition would have been a good fit for the Japanese tire maker, but not for the $1 billion-plus price tag that Icahn paid in an all-cash deal, Tsuya said in 2016.

Bridgestone is well-positioned to do a merger or acquisition in terms of cash and is moving quickly with the decision, Ishibashi said. “Speed is crucial in the world of M&A,“ he said.

Bridgestone is scheduled to report quarterly earnings on May 17.

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