Cooper Tire Terminates Deal To Be Acquired By India's Apollo Tyres

(RTTNews) - Tire maker Cooper Tire & Rubber Co. (CTB) said Monday that it has terminated the merger agreement for its $2.5 billion acquisition by Indian peer Apollo Tyres Ltd. that was signed in mid-June. The move comes a day ahead of the deadline set to complete the deal, after months of dispute over the acquisition price.

Cooper noted that it will now focus on continuing to build its business after posting record operating profit through the first half of the year.

"It is time to move our business forward. While the strategic rationale for a business combination with Apollo is compelling, it is clear that the merger agreement both companies signed on June 12 will not be consummated by Apollo and we have been notified that financing for the transaction is no longer available," Cooper Chairman, President and CEO Roy Armes said.

Findlay, Ohio-based Cooper agreed in mid-June to be acquired by Apollo Tyres for $35 per share in an all-cash deal valued at about $2.5 billion to create the world's seventh-largest tire company.

The deal that was struck at a 43 percent premium was unanimously approved by the boards of directors of both companies. Apollo expected the transaction to be immediately accretive to its earnings and was expected to close within the second half of 2013.

Cooper stockholders also voted overwhelmingly to approve the pending merger on September 30, satisfying Cooper's final affirmative condition under the merger agreement to close the deal.

Cooper then filed a complaint in Delaware Chancery Court in early October asking that subsidiaries of Apollo Tyres be compelled to expeditiously close the pending merger in accordance with the terms of the definitive merger agreement. Cooper said it has an obligation to protect the rights of its stockholders, who voted overwhelmingly in favor of the merger.

The company alleged that Apollo was deliberately delaying a labor agreement with the United Steelworkers union in order to re-negotiate a better deal. The USW represents Cooper employees at facilities in Findlay, Ohio and Texarkana, Arkansas.

Apollo Tyres later in October asked Cooper Tire to reduce the price consideration in light of labor issues in the U.S. and hurdles at the company's joint venture in China.

Apollo Tyres also claimed that Cooper acknowledged that a price reduction was warranted and suggested that the companies were negotiating the amount. However, Cooper denied that it agreed to any concessions on the total consideration for its acquisition.

Apollo Tyres on November 9 received a favorable 'partial ruling' from a U.S. court which found that Apollo is not in breach of its merger agreement with Cooper Tire. The Court found that Apollo has used 'reasonable best efforts' to negotiate with the USW and that, contrary to Cooper's claims.

Cooper appealed against the ruling and the appeal was dismissed again by the Delaware Supreme court on December 17.

"While Cooper believes Apollo has breached the merger agreement, and we will continue to pursue the legal steps necessary to protect the interests of our company and our stockholders, our focus will be squarely on our business and moving it forward," Armes added.

CTB closed Friday's regular trading session at $22.96, up $0.50 or 2.23% on a volume of 0.89 million shares. However, the stock lost $0.94 or 4.09 % in after-hours trading.

Meanwhile, Apollo Tyres closed on the Bombay Stock Exchange at 101.30 rupees, up 0.55% on a volume of 3.18 million shares.