Apollo to take legal recourse after Cooper ends $2.5 bn deal
New Delhi: Cooper Tire & Rubber Co Monday terminated its troubled USD 2.5-billion merger agreement with India's Apollo Tyres, which said it will take legal action against the US-based firm.
"It is time to move our business forward. While the strategic rationale for a business combination with Apollo is compelling, it is clear the merger agreement both companies signed on June 12 will not be consummated by Apollo," Cooper Chairman CEO and President Roy Armes said in a statement.
"We have been notified that financing for the transaction is no longer available. The right thing for Cooper now is to focus on continuing to build our business," he added.
The announcement follows a Delaware Supreme Court ruling earlier this month in favour of Apollo in its spat over the proposed merger pact, which was announced in June this year.
Expressing disappointment over the deal falling apart, Apollo Tyres in a statement said: "Apollo is disappointed that Cooper has prematurely attempted to terminate our merger agreement....Cooper's actions leave Apollo no choice but to pursue legal remedies for Cooper's detrimental conduct."
"...Cooper's lack of control over its largest subsidiary and inability to meet its legal and contractual financial reporting obligations has considerably complicated the situation," it said.
Apollo has made exhaustive efforts to find a sensible way forward over the last several months but Cooper has been "unwilling to work constructively to complete a transaction," it added.
Stating that the US-based firm was keeping its legal options open, Armes said: "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."
On November 12, pushing for an early completion of their merger deal, Cooper Tire & Rubber Co had filed with the Delaware Supreme Court an appeal against the partial ruling on November 8, 2013 by Delaware Chancery Court.
Under the partial ruling of the lower court, Cooper and Apollo were required "to continue to perform their obligations under the merger agreement" till December 31, 2013, the date through which the agreement was to remain in effect.
In October, Cooper filed a complaint in Delaware Court of Chancery to push for completion of their merger and stated that the Indian firm was seeking to delay an agreement with USW, which represents Cooper employees at facilities in Findlay, Ohio, and Texarkana, Arkansas.
Apollo had denied this but sought price reduction in the USD 2.5-billion deal citing problems related to the US firm's China operations and concessions to the workers union, but these were rejected by Cooper.
In June, Apollo had announced it will acquire Cooper Tire & Rubber Co in an all-cash transaction valued at around USD 2.5 billion (nearly Rs 14,500 crore) and the merged entity was billed to become the seventh largest tyre maker in the world.
Commenting on the future roadmap, Armes said: "We look forward to continuing to execute on our strategy in 2014, and we have a very strong base from which to do this brands that are respected for quality, a loyal customer base, a flexible global network of manufacturing facilities, a skilled workforce, and top technical capabilities."
Armes further said: "Addressing the situation at Cooper Chengshan Tire (CCT) in Rongcheng, China is our top priority in the near term."
The issues at CCT were driven by the merger agreement, and with the agreement now terminated, Cooper is working independently to restore normal operations at CCT, including obtaining the information needed for Cooper to resume regular financial reporting as soon as possible, he added.
"Once the situation at CCT is resolved and regular financial reporting has resumed, Cooper will be in a position to address additional options for the deployment of capital targeted at returning value for our stockholders," Armes added.
Apollo Tyres said it was well-positioned for continued success and would pursue other growth opportunities around the world.
"Our business is performing well - as evidenced by the strong top and bottom line results we reported last quarter - and we remain focused on executing our standalone strategic plan to maximise value for Apollo?s shareholders," it said.