Chengshan Group Plans To Exercise Option To Buy Cooper Tire's 65% Stake In JV

(RTTNews) - Cooper Tire & Rubber Co. (CTB) said Wednesday that its Chinese partner Chengshan Group Co. Ltd. has informed the company that it plans to exercise its call option to acquire Cooper Tire's 65 percent stake in the two companies' joint venture in China, Cooper Chengshan (Shandong) Tire Co. Ltd or CCT.

Findlay, Ohio-based Cooper Tire said it is currently reviewing the notice and documentation provided by state-controlled Chengshan to confirm that all of the requirements under the August 14, 2014 option agreement have been met. Chengshan owns the remaining 35 percent stake in the joint venture.

Roy Armes, Chairman, Chief Executive Officer and President of Cooper Tire said, "Cooper is committed to meeting the needs of our customers and continuing to grow in China. Should the process of resolving the ownership of CCT result in Chengshan acquiring our interest in the joint venture, a commercial offtake agreement is in place under which CCT is required to produce Cooper brand products—including Roadmaster truck tires—through mid-2018."

Armes noted that the commercial offtake agreement will assure a secure supply of Cooper brand products and also enable the company to enter into acquisitions, new offtake relationships, or possible greenfield development of additional production capacity anywhere around the world.

Cooper Tire said it now expects to continue to invest in its wholly-owned Cooper Kunshan Tire operation. The company also said it is looking forward to final resolution of the ownership of CCT.

In June 2013, Cooper Tire agreed to be acquired by India's Apollo Tyres Ltd. for $2.5 billion, but in December it terminated the deal due to persistent differences over the offer price. In addition, workers at the Chinese joint venture opposed working for the Indian company.

The matter went to court as Apollo Tyres asked Cooper to reduce the price consideration due to labor issues in the U.S. and problems at its Chinese joint venture. Had the deal closed, it would have created the world's seventh-largest tire company.

Costs related to the Chinese joint venture had negatively impacted Cooper Tire's fiscal 2013 earnings. Workers at the CCT plant had gone on strike in July 2013, citing concerns over the Apollo-Cooper deal.

CTB is trading at $28.34, down $0.97 or 3.31 percent on a volume of 535,558 shares.