Cooper Tire & Rubber Co.
) has filed an appeal with the Delaware Court of Chancery,
seeking the reversal of its partial ruling in the case against
Apollo Tyres Ltd. on Nov 8. Further, the company has requested
the court to make a ruling before Dec 31, 2013 as the merger
agreement between the disputing parties is effective till that
According to the terms of the contract, if the acquisition
does not culminate by Dec 31, 2013 and if neither party breaches
the merger agreement, the agreement can be terminated without any
penalty to either party.
Cooper Tire is hoping for a reversal in the ruling made by the
court last Friday, which rejected its claim that Apollo Tyres was
breaching the terms of its merger agreement with the former by
intentionally delaying an agreement with the United Steelworkers
(USW). Cooper Tire holds the opinion that the ruling
misinterpreted the terms of its merger agreement with Apollo
The company also stressed on the fact that it had a strong
operating record before the merger was announced and that its
Chinese joint venture was also operating smoothly at that time.
The future potential of Cooper Tire had encouraged Apollo Tyres
into inking a merger deal.
Cooper Tire also believes that its Chinese operations would
have continued to perform strongly and without interruption in
the absence of any merger agreement and the agreement itself was
the source of all the problems with its Chinese joint venture.
Apollo Tyres had earlier expressed doubts regarding the control
Cooper Tire has over its Chinese subsidiary, Cooper Chengshan
The merger deal is facing opposition from Cooper Tire's
Chinese joint venture partner Chengshan Group Co. and the Chinese
labor union. The Chinese workers feel that the deal will
jeopardize their employment and are seeking dissolution of the
joint venture. They have stopped the production of Cooper
Tire-branded tires and are not providing any financial
information to the company.
Apollo Tyres revealed in court that it tried to overcome the
opposition by offering to purchase Cooper Tire's Chinese unit.
However, the executives of Cooper Tire's Chinese joint venture
rejected its buyout offer and demanded a higher price for the
As a result of the trouble with the Chinese partners, Apollo
Tyres is having difficulty in selling bonds to finance the deal.
Moreover, Cooper Tire is facing trouble in filing its third
quarter financial results due to lack of information related to
its Chinese operations, which contribute about one-fourth of its
Apollo Tyres had filed a counter-claim against Cooper Tire's
court case stating that the latter has not provided adequate
information required for closing the merger, including access to
accounts and other documents. Thus, Cooper Tire's inability to
provide the third quarter financial results could become a
problem. However, Cooper Tire maintains that it has fulfilled all
the terms of the contract.
The acquisition of Cooper Tire by a wholly-owned subsidiary of
Apollo Tyres was announced in Jun 2013. However, the $2.5 billion
acquisition started facing trouble soon, with both parties
hurling accusations at each other. The problem was triggered by
an arbitrator's order requiring the two companies to reach a new
agreement with USW, the labor union that represents Cooper Tire's
workers in Findlay, Ohio and Texarkana, Ark. While Cooper Tire
claimed that Apollo Tyres was intentionally delaying an agreement
with the labor union to avoid the completion of the acquisition
or to seek a better price, the latter claimed that it is trying
to reach an agreement with USW, although it will take time.
Cooper Tire currently carries a Zacks Rank #5 (Strong Sell).
Some stocks that are worth considering in the same industry
Goodyear Tire & Rubber Company
). Continental AG carries a Zacks Rank #1 (Strong Buy), while
Goodyear and Bridgestone carry a Zacks Rank #2 (Buy).
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