BackCooper Tire blames delay in $2.5 billion buyout on Apollo Tyres
Cooper says it would have quickly closed a deal with USW union if it had been allowed to take part in labour talks
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Chancery Court in Wilmington, Delaware: Cooper Tire and Rubber Co. could have quickly closed an agreement with the United Steelworkers (USW) union and expedited a planned $2.5 billion buyout by Apollo Tyres Ltd if it had been allowed to take part in union negotiations, a lawyer testified on Thursday at trial.
Instead, Apollo delayed the USW talks and insisted officials of Findlay, Ohio-based Cooper be excluded, Stanley Weiner, a partner at the Jones Day LP law firm who represented the US’s fourth-largest tire maker in the deal, told Delaware Chancery Court Judge Sam Glasscock III at a trial in Wilmington.
“If Cooper executives had been included in Apollo’s union talks, they could have helped get it done on an agreement within a week," Weiner said. “Instead, Apollo’s attitude was there’s no place for Cooper as part of the labour talks," he added.
Glasscock is being asked to decide whether labour troubles with the USW union and a Chinese joint venture created significant-enough problems to change the value of the company and allow Apollo to pull out of the deal. The Gurgaon, India-based tire maker demanded a $2.50-a-share price cut to close the deal. Apollo originally agreed to pay $35 a share.
Price cut
Cooper officials contend Apollo executives, including vice chairman Neeraj Kanwar, suffered buyer’s remorse after agreeing to acquire Cooper and are using the labour problems as a pretext to torpedo the deal. They added that Apollo officials dragged their feet in negotiating with the union in hopes that the deal would collapse.
Kanwar, who took the witness stand today, said his goal was still to get the deal done. To make that happen, Apollo needs the $2.50-a-share price cut to cover the costs of concessions demanded by the steelworkers in exchange for blessing the buyout.
The $32.50 price is what I need to pay for as much as $125 million in concessions demanded by the US labour union, the executive told Glasscock.
“Cooper’s sometimes-contentious relationship with the steelworkers’ union was the reason Apollo officials decided to keep them out of the labour talks," Kanwar said. “The Indian company was seeking to build a relationship with the union and didn’t want it to start on a bad note by involving the Cooper officials in the talks," he added.
Kanwar, whose family owns more than 40% of Apollo’s shares, said he was shocked to learn Cooper had lost control of its Chinese joint venture and had no access to its financial data. Its Chinese partners opposed Cooper’s decision to sell to Apollo, so they stopped making Cooper-brand tires and barred Cooper executives from the facility.
‘No access’
“I never realized what I was getting into," Kanwar said. “Here’s a $4.2 billion company with no access to its largest joint-venture company in the world."
Cooper chief executive officer Roy Armes said on Wednesday he had warned Kanwar and other Apollo officials the tire maker’s Chinese partners and the US union may oppose the buyout during negotiations. He also conceded it was a big problem that Cooper is being denied access to the Chinese joint-venture’s financial records and that may make filing the parent company’s third-quarter financial results difficult.
Armes also said on Wednesday he was offended that Kanwar and other Apollo executives wanted to alter the original deal to help solve labour problems they knew about when agreeing to the $2.5 billion buyout.
Glasscock said on Thursday one of the issues in the case will be whether the price-reduction request was reasonable. He’ll also have to decide if Apollo was using the labour problems as a pretext to scuttle the deal.
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