Cooper Tire shareholders OK deal

Sale to Apollo Tyres needs accord with unions, 1 partner

9/30/2013

FINDLAY — Cooper Tire & Rubber Co. shareholders on Monday overwhelmingly approved selling the company to Apollo Tyres Ltd., a big step toward finalizing the $2.5 billion acquisition.

However, lingering labor issues must be addressed before the two companies can close on the deal.

For Cooper, convincing its shareholders was the easy part.

Apollo agreed to pay $35 per share to acquire the Findlay-based company, giving stockholders a premium of 43 percent from where shares were trading the day before the deal was announced in June.

The more difficult part could prove to be reaching an agreement with the labor union that represents two important Cooper plants in the United States.

In mid-September, an arbitrator ruled that Cooper’s plants in Findlay and Texarkana, Ark., cannot be sold until India-based Apollo reaches an agreement with the United Steelworkers regarding Cooper’s approximately 2,500 union-represented workers.

The ruling, based on a successorship clause in the labor contract, effectively puts the whole deal on hold until the issue is resolved.

Cooper is also dealing with an ongoing work stoppage at one of its Chinese plants related to the deal.

Though that adds a bit of uncertainty to the transaction, Efraim Levy, an analyst with Standard & Poor’s who follows Cooper Tire, said Monday he still expects the deal to go through.

“I think those [issues] will be resolved. The question, really, is what the cost of resolving it is,” Mr. Levy said.

The union has expressed concern about the amount of debt being taken on by Apollo to finance the purchase, worrying it could hamper the combined company in the future.

Some analysts also have raised concerns about the debt load, and Apollo’s stock has fallen considerably on the National Stock Exchange in Mumbai, India.

“Labor’s concerned about the risk of that transaction,” Mr. Levy said. “If you overburden yourself, there’s a risk that it sours.”

Whatever deal is ultimately reached, Mr. Levy believes labor’s main focus is on job security.

“Additional benefits don’t help much if there’s a failure,” he said. “Their issue is making sure the jobs are there.”

A United Steelworkers spokesman in Pittsburgh said Monday the union was aware of the results of the shareholder vote and said officials “look forward to Cooper and Apollo resolving any outstanding issues that remain between the parties to allow an expeditious and successful completion of the acquisition."

Union officials from the local United Steelworkers bargaining units in Findlay and Texarkana didn’t return calls seeking comment Monday.

In an email, a Cooper spokesman told The Blade the company is pleased with Monday’s vote and said the merger with Apollo is a “compelling transaction that will bring benefits to all stakeholders including employees, customers, and our communities.”

The company still believes the deal will close by the end of the year.

“Remaining steps include customary closing conditions as well as reaching agreements with the United Steelworkers for the Findlay, Ohio, and Texarkana, Ark., plants, which we are optimistic will be achieved through continued dialogue between the unions and Cooper and Apollo,” company spokesman Anne Roman wrote.

Ms. Roman said Apollo and Cooper continue to communicate with workers and Cooper’s joint venture partner at the Chinese plant to resolve the concerns and return the factory to normal operation as soon as possible.

“All other Cooper facilities around the world — including our wholly owned factory in Kunshan, China — are operating as normal,” Ms. Roman said.

Cooper said about 78 percent of its outstanding shares were voted Monday, with 96 percent of those voting approving the deal.

Contact Tyrel Linkhorn at:

tinkhorn@theblade.com

or 419-724-6134.