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Business News/ Companies / Apollo’s proposal to reduce bid price ‘offends’ Cooper CEO
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Apollo’s proposal to reduce bid price ‘offends’ Cooper CEO

CEO Roy V. Armes testifies that he was offended after Apollo suggested cutting $2.50 a share from the negotiated price

Cooper said last week that it reached a deal with the United Steelworkers, thus eliminating Apollo’s claims of an adverse change. Photo: BloombergPremium
Cooper said last week that it reached a deal with the United Steelworkers, thus eliminating Apollo’s claims of an adverse change. Photo: Bloomberg

Wilmington: Cooper Tire and Rubber Co.’s chief executive officer told a judge he was offended when suitor Apollo Tyres Ltd suggested reducing the per-share price in a $2.5 billion buyout bid.

Delaware chancery court Judge Sam Glasscock III in Wilmington is considering whether Apollo is having second thoughts about the deal and should be forced to complete the buyout at $35 a share. The judge granted fast-track status to the case, which went to trial today.

Cooper CEO Roy V. Armes testified that after Apollo suggested cutting $2.50 a share from the negotiated price for concessions to the United Steelworkers’ union, “I was offended, frankly". Armes said he has asked his employees to continue working with Apollo on the deal because there’s still some very good merit to the combined company.

Talks to complete the largest acquisition by an Indian company in North America soured in October amid opposition from US and Chinese workers. Apollo, based in Gurgaon, India, sought to cut its offer by as much as $9 a share, citing labour issues.

On 4 October, the day Apollo’s purchase was originally scheduled to be completed, Findlay, Ohio-based Cooper sued, alleging Apollo was intentionally delaying the deal.

In pretrial filings, Apollo denied having buyer’s remorse, saying it still wants to complete the acquisition and Cooper hasn’t lived up to the contract. Central to Apollo’s defence is the possibility of a material adverse effect, or significant change in Cooper’s value, since the contract was signed, which could kill the deal.

Cooper agreement

Cooper maintains it has complied with the sale agreement, even amid troubled negotiations with the United Steelworkers and a recalcitrant Chinese unit, and claims Apollo is angling for a better bargain.

Cooper said last week that it reached a deal with the United Steelworkers, thus eliminating Apollo’s claims of an adverse change. Cooper hasn’t disclosed details of the tentative agreements with unions in Findlay and Texarkana, Arkansas, pending review and consent by Apollo. The agreements expire on 18 November.

Apollo, which snubbed Cooper’s demand to sign off on the union agreement by 4 November, in a letter to Glasscock accused Cooper of taking extraordinary steps to induce the union into the agreement before the trial.

In addition to the labour issues, Apollo points to a lack of current financial data from Cooper and to ambiguous projections that suggest serious future losses.

‘Staggering change’

“Cooper’s current third-quarter forecast for 2013 is $3.4 billion in revenues and $257 million in operating profit—a staggering change in that forecasts provided by Cooper in July reflected results that were 25% and 48% higher, respectively," Apollo said in court papers.

In its complaint, Cooper contends Apollo agreed to use its reasonable best efforts to complete the transaction or pay a $112.5 million fee to walk away from the deal.

For Cooper to win, the court in part must find that disruption at Cooper’s joint venture in China is carved- out from being a material adverse effect and that Apollo didn’t use its best efforts with the United Steelworkers, according to an 30 October overview of the case by Churchill Capital Research.

Apollo said in court papers filed 1 November that it worked diligently to reach an agreement with the United Steelworkers and its efforts exceeded any possible standard that could be applied under the merger agreement.

Cooper’s China venture, called Cooper Chengshan (Shandong) Tire, operates the company’s biggest manufacturing site, according to the venture’s union. Workers there stopped producing Cooper tires 13 July to protest the Apollo deal.

Also that month, Chinese partner Chengshan Group Co. sued, alleging that the buyout would undermine its operations. Cooper has said the litigation lacks merit.

The case is Cooper Tire v. Apollo, CA8980, Delaware Chancery Court (Wilmington). Bloomberg

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Published: 06 Nov 2013, 01:33 AM IST
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