Cooper Tire's Roy Armes says the lawsuit against Apollo "is a necessary step in the process to assure that the terms of the merger agreement are met as required"
Apollo Tyres Ltd.'s friendly takeover of Cooper Tire & Rubber Co. is not so friendly anymore.
On Friday, Oct. 4, 2013, Cooper filed a complaint in Delaware Chancery Court asking that subsidiaries of Apollo "be required to expeditiously close the pending merger between the two tire companies in accordance with the terms of the definitive merger agreement."
Cooper's entire board of directors wants the acquisition to go forward. So do Cooper's stockholders, who recently voted overwhelmingly to approve the pending purchase.
(On June 12, 2013, Apollo Tyres and Cooper Tire announced the execution of a definitive merger agreement under which a wholly-owned subsidiary of Apollo will acquire Cooper in an all-cash transaction valued at approximately $2.5 billion.)
Cooper believes Apollo is dragging its feet, however. Through its lawsuit, Cooper is asking the court to compel Apollo to take actions so that the transaction may close. Among other matters, the complaint says that Apollo is seeking to delay an agreement with the United Steelworkers. The USW represents Cooper employees at facilities in Findlay, Ohio, and Texarkana, Ark.
An arbitrator ruled on Sept. 13, 2013, that as result of the pending merger, Cooper and Apollo must enter into new agreements with the union prior to closing. By delaying resolution with the USW, Cooper says Apollo is breaching the merger agreement.
“Cooper has an obligation to protect the rights of our stockholders, who voted overwhelmingly in favor of the merger," said Cooper Chairman, CEO and President Roy Armes. "With their approval, we have met our conditions for closing. The complaint filed today (Oct. 4) is a necessary step in the process to assure that the terms of the merger agreement are met as required and that we do everything possible to get the transaction closed promptly.
“The strategic rationale for the merger with Apollo is solid, and we look forward to finalizing the transaction, which will create the seventh-largest tire company in the world. Apollo is an outstanding company. We are confident both organizations will work effectively together to take advantage of the many opportunities this compelling transaction will offer within the world’s largest tire market of North America as well as the fastest growing geographies including China and India."
Apollo Tyres is not happy with the lawsuit.
“We are disappointed that Cooper has taken this unusual step and question their motives," said the company in an official statement. "The litigation simply has no basis.
"We have been working diligently to assist Cooper in resolving its outstanding issues with the United Steelworkers. Under the arbitrator’s ruling, resolution of those issues is a prerequisite to closing. We are also actively supporting Cooper in reaching a resolution in its financially damaging dispute with its Chinese JV partner.
"We continue to have committed financing ready to launch subject to resolving the USW issues and receiving current, updated Cooper financial statements. We look forward to closing as expeditiously as possible once we reach agreement with the USW and complete the marketing of our financing.”
In addition to Apollo securing the needed funding and the USW issue being resolved, what are the technical items that need to be met before the deal can be closed? To find out, check out this Security and Exchange Commission link: www.sec.gov.
For the full statements of each company, see this blog post from sister magazine MTD here.
From Bobit sister magazine Modern Tire Dealer.