Cooper loses bid to rescue Apollo deal
Dec 17 2013 , Chennai
With less than a fortnight left for the December 31 deadline to get Apollo to go ahead with the deal at the originally-agreed price, the Delaware Supreme Court on Monday dismissed the US tyre giant’s appeal against an earlier ruling by a lower court in Chancery that said Apollo has been meeting its obligations to conclude new contract terms with unions at Cooper’s plants in Texas and Ohio.
The order virtually paved the way for the Indian firm to walk away from the deal.
However, Apollo Tyres on Tuesday said it was still keen on going ahead with the deal. “Apollo continues to believe in the merits of its combination with Cooper and, notwithstanding Cooper’s stated aim to continue to pursue its misguided legal claims, it is committed to finding a sensible way forward, if possible,” a statement from Apollo said.
The Indian company also sought to put the ball firmly in Cooper’s court, thereby sending out a clear signal that if the deal has to go ahead from here on, it will be on Apollo’s terms.
“We are pleased by the decision of the Delaware Supreme Court, which did more than dismiss Cooper’s appeal; the court decided that the appeal was improvidently granted in the first place. Cooper’s litigation strategy to date has done nothing but generate unnecessary cost for its shareholders and for Apollo, and compounded the obstacles that Cooper’s situation has created for this merger,” Apollo said in the statement.
Cooper termed the Delaware Supreme Court verdict as a “procedural ruling” that returned the case back to the Delaware Chancery court, a Reuters report said.
“Both Cooper and Apollo will return to the Chancery court for resolution of the remaining issues in the case,” Cooper said in a statement to Reuters. “Cooper believes Apollo has breached the merger agreement and we will continue to pursue our legal options as we work to protect the interests of our company and our stockholders,” the statement said.
In a bid to expand globally in order limit its dependence on the domestic market, Apollo had agreed in June to buy Cooper Tire & Rubber for $2.3 billion. This worked out to $35 a share and the India tyre maker proposed to fund it largely through debt. The deal, if concluded successfully, would make Apollo the seventh largest tyre maker in the world.
But Apollo faced problems in the face of unforeseen demands from the unions in the Cooper plants in the US, besides other developments over Cooper’s JV in China, which were beyond its control. Even as the Indian tyre maker was trying to find ways to overcome these issues, the market was abuzz with talk that Apollo may no longer be willing to pay the price it agreed on originally, even as the stock tumbled in the domestic market within days of the announcement of the deal, indicating a clear thumbs-down from its shareholders.
Even as an earlier deadline of October 4 passed, Cooper sensed trouble and took legal recourse to force Apollo to go ahead with the deal. However, the Chancery court ruled about a month ago that Apollo had not breached its obligations under the terms of the deal. Cooper then moved the Delaware Supreme Court, which dismissed its appeal on Monday.