Cooper trial over $2.5 billion Apollo bid reveals side deal

Wilmington: Apollo Tyres Ltd sought to eliminate an obstacle to its $2.5 billion buyout of Cooper Tire and Rubber Inc. by offering to purchase Cooper’s Chinese unit for $147 million, a witness testified.

“Apollo officials made the offer in hopes of overcoming the opposition of executives of Cooper’s Chinese joint venture to the $35-a-share acquisition of Cooper,” Sunam Sarkar, Apollo’s chief financial officer, told Delaware Chancery Court Judge Sam Glasscock III on Thursday at a trial over the faltering deal. “The Chinese officials rejected the offer, seeking at least $200 million,” he said.

Sarkar’s testimony about the effort to buy the Chinese unit, code-named Project Charlie, was intended to counter Cooper’s claims that Apollo suffered from buyer’s remorse after agreeing to buy the US’s fourth-largest tire maker and now is seeking to torpedo the deal. “Apollo made the offer to push the deal forward,” Sarkar said.

Glasscock is being asked to decide whether labour troubles with the Chinese joint venture unexpectedly damaged the value of Findlay, Ohio-based Cooper’s business and provided a basis for Apollo to pull out of the acquisition or cut the price. The Gurgaon, India-based tiremaker demanded a $2.50-a-share price cut to complete the deal.

Trial testimony ended on Thursday. Glasscock will hear closing arguments on Friday in Georgetown, Delaware.

Chinese objections

Cooper officials testified earlier in the case that they alerted Apollo executives that their Chinese partners might object to the buyout. Chinese officials have stopped making Cooper-brand tires at its facility and ceased uploading financial information to the parent company’s computers.

That means Cooper may have difficulty in producing third- quarter financial results and Apollo officials might point to that as a breach of the acquisition agreement.

The opposition from executives of Cooper’s Chinese unit has made it impossible to sell bonds to help finance the acquisition, Apollo officials contend.

Robert Cepielik, a forensic accountant, testified that having a unit withhold financial information from a parent trying to put out consolidated financial results is a highly unusual situation. I’ve never seen anything like it.

The lack of financial information about the Chinese operation raises accounting questions over the buyout and leaves Apollo executives with no assurances about the quality of the financial information they are getting from Cooper, Cepielik, an accountant with Deloitte Financial Advisory Services LLP, testified. He was called as an expert by Apollo. Bloomberg