Cooper sale to Indian tire firm lands in court

Findlay firm wants deal to close quickly

10/5/2013

Editor's note: This version of the story is updated to include a statement released by Apollo Tyres.

FINDLAY — Cooper Tire & Rubber Co. on Friday filed a complaint in Delaware Chancery Court asking that subsidiaries of India’s Apollo Tyres Ltd. be required to expeditiously close the pending $2.5 billion deal, under which the Indian firms will acquire Cooper.

Cooper stockholders voted overwhelmingly to approve the merger on Monday. That satisfied Cooper’s final condition for closing the all-cash transaction. The purchase was announced June 12 after the boards of both companies unanimously approved the sale to a wholly owned subsidiary of Apollo for $35 per share.

Cooper Tire asked the court to compel Apollo to take action so that the transaction can close. The complaint says that Apollo wants to delay an agreement with the United Steelworkers, which represents Cooper Tire employees at its plants in Findlay and in Texarkana, Ark.

An arbitrator ruled on Sept. 13 that Cooper Tire and Apollo must enter into new agreements with the union before closing.

By delaying a resolution with the USW, Apollo is breaching the merger agreement, Cooper Tire said in its court filing.

"We are disappointed that Cooper has taken this unusual step and question their motives," Apollo said in a released statement. "The litigation simply has no basis. We have been working diligently to assist Cooper in resolving its outstanding issues with the United Steelworkers. Under the arbitrator’s ruling, resolution of those issues is a prerequisite to closing. We are also actively supporting Cooper in reaching a resolution in its financially damaging dispute with its Chinese JV partner. We continue to have committed financing ready to launch subject to resolving the USW issues and receiving current, updated Cooper financial statements. We look forward to closing as expeditiously as possible once we reach agreement with the USW and complete the marketing of our financing."

News of the potential snag caused Cooper Tire stock to plummet $1.76, or 5.6 percent, Friday to $29.51 a share on the New York Stock Exchange. Over 4 million shares of Cooper Tire stock traded hands — four times the stocks' average trade volume — with the heaviest volatility occurring shortly before noon.

On Friday afternoon a source familiar with the deal told The Blade there were rumblings that the transaction might be in danger. “I think the deal’s falling apart,” the source, who asked to remain anonymous, said. “It’s got a lot to do with China and finance. Things can always change, though.”

The amount of debt Apollo would take on to finance the deal has worried some analysts, as well as Apollo shareholders in India, where the company's stock price fell considerably after the deal was first announced.

Sources in Findlay said negotiations between Apollo and the United Steelworkers are ongoing, though specifics of what the USW seeks is unknown.

“Cooper has an obligation to protect the rights of our stockholders, who voted overwhelmingly in favor of the merger. With their approval, we have met our conditions for closing. The complaint filed today is a necessary step in the process to assure that the terms of the merger agreement are met as required and that we do everything possible to get the transaction closed promptly,” Roy Armes, Cooper chairman, chief executive officer and president, said in a statement.

“The strategic rationale for the merger with Apollo is solid, and we look forward to finalizing the transaction, which will create the seventh-largest tire company in the world,” Mr. Armes stated. “Apollo is an outstanding company.

"We are confident both organizations will work effectively together to take advantage of the many opportunities this compelling transaction will offer within the world’s largest tire market of North America as well as the fastest growing geographies including China and India.

Cooper is well positioned in the competitive global tire industry with highly respected brands, an extensive dealer and distribution network, quality products, outstanding customer service and top technical capabilities.”