Apollo Tyres’ $2.5 billion deal to acquire Cooper Tire has run into rough weather as its demand for price reduction because of problems related to the US firm’s operations in China and concessions to workers’ union has been rejected by the latter.
According to a complaint filed by Cooper in a US court, Apollo wanted a price renegotiation “far greater than the $2.50 reduction it had earlier proposed, and at one point referencing ‘$8 or $9’ per share”. As per the original deal announced in June this year, Apollo had agreed to buy Cooper at $35 per share in an all cash transaction.
The Indian firm accused Cooper of misrepresenting facts about its Chinese operations and also of unwillingness to give financial concessions to worker’s union, United Steelworkers (USW), but the US firm asserted that the risks were part of their deal.
In a statement, Apollo said the company and its financing banks, Morgan Stanley, Deutsche Bank, Goldman Sachs and Standard Chartered Bank were justified under their merger agreement to ask Cooper to provide updated financial statements and guidance “in light of the significant and unanticipated costs that go well beyond those Apollo is obligated to bear under the merger agreement.
“Cooper has acknowledged to Apollo that some price reduction is warranted. The issue now is by how much.”
It added: “While Apollo continues to be supportive of Cooper’s efforts to establish control over its subsidiary’s operations and to assert Cooper’s rights against its JV partner, Apollo cannot be responsible for Cooper’s failures to do so.”
When contacted, Cooper Tire & Rubber Company Vice President, Communications & Public Affairs Anne Roman said: “The situations with the USW and the joint venture partner and union in China are a direct result of the merger agreement, and are risks Apollo assumed under the merger agreement.”
On the price reduction, she said: “Cooper is acting in the best interests of our shareholders, who overwhelmingly approved the pending merger with Apollo for $35 per share. Cooper has not agreed that a reduction in share price is warranted.”
According to Cooper’s complaint in the Court of Chancery, Delaware, “On October 3, Apollo’s representatives again informed Cooper that Apollo wanted a price renegotiation, this time suggesting a price reduction far greater than the $2.50 reduction it had earlier
“...Cooper has breached material representations andcovenants, including with respect to its majority-owned China subsidiary due to the fact that Cooper has no control over the subsidiary or access to its books and records,” Apollo said.
It also refuted Cooper’s complaint filed last week in a US Court that it was seeking to delay an agreement with the USW, which represents Cooper employees at facilities in Findlay, Ohio and Texarkana, Arkansas.
“Apollo has indicated to the USW in discussions over the past two weeks that Apollo is willing to make material concessions to the USW, subject to arranging for additional financing or financial concessions. Cooper had been unwilling to provide similar terms to the USW in negotiations over the three month period before its arbitration setback,” the Indian firm said.
Elaborating on the issues related to Cooper’s China operations, Apollo said: “Cooper’s inability to access the facilities of its Chinese subsidiary, to determine what products this subsidiary is producing or to whom those products are being sold, to track or control how its funds are being spent or even to access operating or financial information, either physically or remotely, goes well beyond any typical work stoppage.”