March 26 (Bloomberg) -- Goodyear Tire & Rubber Co. shares rose to their highest since 1999 after the largest U.S. tiremaker agreed to sell a unit for more than some analysts expected.

The company's accord to sell its unit that makes hoses and conveyor belts to Carlyle Group for $1.47 billion was announced March 23 after the close of New York Stock Exchange trading. Analysts at Deutsche Bank Securities Inc. and Merrill Lynch & Co. said the sale price exceeded their estimates.

The price for the Engineered Products unit ``surpassed our most ambitious assumptions,'' analyst Rod Lache of Deutsche Bank said in a note to investors today. Goodyear may use the proceeds to pay debt and help fund a retiree health-care trust, he said.

The shares of Akron, Ohio-based Goodyear gained $1.47, or 4.9 percent, to $31.76 at 4:05 p.m. in NYSE composite trading. It was their highest close since Dec. 3, 1999.

The tiremaker's shares have gained 51 percent this year, behind only RadioShack Corp. among companies in the Standard & Poor's 500 Index. Goodyear is reducing costs under a contract reached with the United Steelworkers union in December after an 85-day strike. The company wants to shed $1 billion in annual expenses by the end of 2008.

Goodyear is divesting the Engineered Products unit to focus on tiremaking and has had it up for sale since September 2005. The unit had sales last year of $1.51 billion, 7.5 percent of Goodyear's total, and has 6,500 employees in 12 countries.

Improved Outlook

S&P raised its outlook on Goodyear's credit rating to ``positive'' from ``stable,'' saying it expects a ``significant amount'' of the sale proceeds will be used to reduce debt. S&P's long-term debt rating on Goodyear is B+, four levels below investment grade. Lache, who rates Goodyear shares a ``buy,'' raised his 12-month target for the stock to $44 from $38.

Goodyear said on March 23 that it will record a gain on the unit sale, without giving an amount or the timing.

Carlyle Group, based in Washington, plans to keep the unit in Akron and retain its management. The unit's name would change to EPD Inc. The sale depends on Carlyle reaching a labor agreement with the United Steelworkers union at four U.S. plants.

Goodyear has been shedding assets that aren't directly related to car and truck tires for the past two years, including operations that made farm tires, adhesives and tire fabric.

To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6bloomberg.net

Last Updated: March 26, 2007 16:07 EDT