Apollo Tyres Ltd and Cooper Tire & Rubber Co. 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.

Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Cooper stockholders will receive $35.00 per share in cash. The transaction represents a 40% premium to Cooper’s 30-day volume-weighted average price.

This combination will bring together two companies with highly complementary brands, geographic presence, and technological expertise.

Apollo was founded in 1972, and Cooper, the 11th-largest tire company in the world by revenue, was founded in 1914 and today supplies tires worldwide through brands such as Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon.

The combined company will be the seventh-largest tire company in the world and will have a strong presence in high-growth end-markets across four continents. With a combined $6.6 billion in total sales in 2012, the combined company will have a full range of brands.

The combination is expected to deliver value creation benefits of approximately $80 to $120 million per annum at the EBITDA level. These ongoing benefits are expected to be fully achieved after three years and derived from operating scale, sourcing benefits, technology, product optimization, and manufacturing improvements. The transaction is expected to be immediately accretive to Apollo’s earnings.

The close of the transaction, assuming timely regulatory approvals and other customary closing conditions, as well as approval by Cooper’s stockholders, is expected to take place within the second half of 2013.

Following the close, Cooper will become a privately held company and its common stock will no longer be traded on the New York Stock Exchange. It is expected that Cooper will continue to be led by members of its current management team and will continue to operate out of its facilities located around the world.

Cooper will continue to recognize the labor unions and honor the terms of collective bargaining agreements presently in effect while generally maintaining compensation and benefit levels for non-union employees.

Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. served as financial advisors and investment firm Greater Pacific Capital acted as strategic and financial advisor to Apollo.

Standard Chartered is the sole provider of transaction financing at the Apollo Tyres level and is also the structuring advisor. Morgan Stanley Senior Funding Inc., Deutsche Bank Securities Inc., Standard Chartered and Goldman Sachs Bank USA are joint lead arrangers providing committed funding to Apollo’s acquisition subsidiary.

Sullivan & Cromwell LLP and Amarchand & Mangaldas & Suresh A Shroff & Co served as legal advisors to Apollo. BofA Merrill Lynch served as financial advisor and Jones Day served as legal advisor to Cooper.