Cooper Tire moves court to save $2.5 billion Apollo deal
06 November 2013
US tyre company Cooper Tire & Rubber Co has sued its would-be buyer, Apollo Tyres Ltd, in Delaware court, seeking an order forcing Apollo to close its $2.5-billion takeover deal.
Apollo, which agreed to acquire Ohio-based Cooper Tire & Rubber Co for $35-per-share, says it wants to buy trouble-torn Cooper for less than the agreed price.
Apollo says the labour problem at Cooper's US operations and the uncertainties around its operations in China and the worsening financials at Cooper's North American business have combined to make it impossible for Apollo to raise the necessary debt needed for the acquisition.
Apollo is going by an arbitrator's ruling that Apollo enter into a collective bargaining agreement with the workers union at two Cooper plants before it can proceed with the closure of the deal.
Cooper, on the other hand, accuses Apollo of using the labour issue as an excuse to back out of the merger deal or seek a lower price for Cooper.
Apollo, however, says it is difficult to reach a new contract with Cooper's US labour union and said Cooper Tire's last-minute announcement of a tentative agreement with workers represented by United Steelworkers union as part of its push to close the $2.5 billion sale.
Apollo called the labour deal a "last-minute stunt" to gain advantage at the court when the two companies square off over their failure to close their deal.
Cooper has 13,000 employees worldwide and Apollo and its biggest shareholder group, the Kanwar family is regretting the deal after analysts released negative reports on it.
Also, Apollo alleges that Cooper failed to disclose that it did not have control over its Chinese joint venture, which accounts for as much as a quarter of its earnings.
Cooper does not even know what is being produced or sold at the Chinese venture, it pointed out.
Apollo said it cannot close the deal until it gets accurate, updated financial information from Cooper.
Cooper's lawyers, on the other hand, say Apollo has buyer's remorse.
The US company manufactures Cooper, Roadmaster and Mastercraft brands of tyres and its acquisition would push Apollo to No 7 spot among global tyre companies, with nearly 80 per cent of its revenues generated overseas.
The three-day, non-jury trial will be held in front of Sam Glasscock, a judge on Delaware's Court of Chancery, which has put the case on a fast track.
Analysts expect Glasscock to rule within days after the trial ends, although with the Chinese venture lock-out and other problems, it could still be on a negotiated settlement.
They also doubt if the court will order closure of the deal on the original $35 per share terms.
Cooper Tire stock closed at $25.93, down 0.3 per cent on Friday, or about 25 per cent below the Apollo price.