Cooper Tire & Rubber Co said it was terminating a proposed $2.5 billion sale to Apollo Tyres Ltd., saying the Indian tyre maker had failed to find financing for the transaction.
The termination, disclosed in a statement, marks the end of a failed agreement plagued by obstacles from the start. The Indian tyre maker in June agreed to buy Cooper for $35 a share, hoping to transform itself into the world’s seventh-largest tyre maker and cut its dependence on domestic sales.
Cooper did not mention whether Apollo would pay a $112.5 million break-up fee, but said it believes the Indian tyre maker “has breached the merger agreement,” and added it would continue to pursue “legal steps” to protect the company and its shareholders.
The two companies have been mired in a bitter legal stand-off over the deal. Cooper has tried to force the Indian company to complete the deal under the agreed terms, while Apollo sought a price cut of as much as $9 a share, citing Cooper’s U.S. labor trouble and disruptions at a Chinese joint venture.
“It is time to move our business forward,” said Roy Armes, Cooper Tire’s chief executive in the statement.
“While the strategic rationale for a business combination with Apollo is compelling, it is clear that the merger agreement both companies signed on June 12 will not be consummated by Apollo and we have been notified that financing for the transaction is no longer available,” he added.
Expectations the deal would unravel rose after a court in Delaware in November ruled the Indian tyre maker had not breached its obligations, delivering a setback to Cooper’s attempt to compel Apollo to close the deal.
An appeal by Cooper was dismissed by the Delaware Supreme Court this month. The case has returned to the lower court, which has asked for an update on January 10 on the status of the deal.
The two sides have been in an acrimonious stand-off for months, with Cooper accusing Apollo of suffering a case of buyer’s remorse. The U.S. tyre maker has refused to accept a lower offer from Apollo.
Meanwhile, the Indian tyre maker has blamed Cooper, saying issues arising from the U.S. company’s labour troubles in China and the United States had made it difficult to secure financing for the deal.
At the heart of the dispute has been Apollo’s failure to reach contract agreements with Cooper’s United Steelworkers union as mandated by a U.S. arbitrator in September.
At the same time, Chengshan Group, Cooper’s partner in China, has opposed any merger with Apollo, filing a lawsuit against the U.S. tyremaker to dissolve their joint venture.
Apollo has said these two developments were not expected at the time of the deal, and as a result has sought to cut the price of the deal. Cooper maintains the issues are a result of the merger and says Apollo was aware of the risks.
Cooper CEO Armes said addressing the joint venture in China and restoring normal operations was the company’s “top priority in the near term,” while noting its focus would also be on growing its broader business.
“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,” he said.
The collapse leaves Apollo to focus on a slowing home market, which provides two-thirds of its revenue. The tyre maker reported in November domestic sales in July-September had fallen 7 percent. (Reuters)