Unrest in China delays Cooper

Tire firm unable to release 3Q data, could impact sale to Apollo

11/11/2013

FINDLAY — Time is ticking down for Cooper Tire & Rubber Co. to report its third-quarter financial results, a routine event that has been complicated by unrest at its Chinese subsidiary.

The company has until Thursday to provide the data to the Securities and Exchange Commission. Cooper’s management, however, remains locked out of the firm’s joint-venture plant in China and can’t access financial records from that operation.

Whether the company can remedy that situation may have implications on the pending but troubled deal in place to sell the company to Apollo Tyres Ltd. of India.

The trouble in China started in June with the signing of a merger agreement between Apollo and Cooper that called for Apollo to purchase the Findlay-based company for $35 per share in a deal worth approximately $2.5 billion. Chinese workers weren’t happy with the agreement, and as the dispute in China dragged on, it became a significant point of contention between the two companies.

The deal was further complicated by an arbitrator’s ruling that Cooper could not complete the merger — originally scheduled to close in early October — without Apollo having a deal in place with Cooper’s U.S. labor unions.

After the first closing date came and went, Cooper took the matter to court, accusing Apollo of breaching the merger agreement by intentionally delaying negotiations in an effort to sink the deal.

Meanwhile, Apollo sought to lower the per-share purchase price it would pay to acquire Cooper and accused the company of breaking the merger agreement.

A Delaware Chancery Court judge ruled Friday that there was no merit to Cooper’s claim that Apollo was trying to scuttle the deal.

“Nothing in this decision, however, should indicate that Apollo is excused from using its best efforts to pursue an agreement going forward,” Judge Sam Glasscock III said, according to a transcript of the hearing.

Judge Glasscock is expected to rule on other issues related to the case later this week.

On Friday, Apollo cheered the decision and said it remains committed to finding a way to close the deal.

“We are pleased that the Delaware Court has found that Apollo is not in breach of its merger agreement with Cooper Tire. Furthermore, the court found that Apollo has used ‘reasonable best efforts’ to negotiate with the USW and that, contrary to Cooper’s claims, ‘nothing in Apollo’s conduct indicates buyer’s remorse,’ ” Apollo said in a statement.

Cooper said it was disappointed by the ruling.

“Cooper is assessing its options with respect to this decision and awaits the court’s ruling on other open matters in this case,” the company said in a statement.

Bloomberg News reported Monday that Judge Glasscock sent a letter over the weekend to attorneys representing the two companies that said Cooper must prove it had satisfied all the conditions of the buyout agreement. The letter said whether Cooper did so remains unresolved in litigation.

As for Cooper’s Chinese operation, an attorney representing the company said in court that should the deal not close, the company’s shareholders will be on the hook for the millions of dollars in lost profits because of the work stoppage related to the merger.

“If the merger does not close, not only will the shareholder expectations not be met, but Cooper and its shareholders will be forced to bear the tens of millions of dollars or more in profit loss that Cooper is undergoing right now to which there’s no real dispute,” attorney Robert S. Faxon said, according to a transcript of the proceedings.

Shares of Cooper’s stock fell more than 11 percent Friday. Shares gained back some of those losses on Monday, rising 2 percent to $24.34.

Contact Tyrel Linkhorn at tlinkhorn@theblade.com or 419-724-6134.