Cooper to go after Apollo for damages

It appears Cooper Tire & Rubber Co. has quit trying to force Apollo Tyres to buy it for $2.5 billion. Cooper’s next mission: seeking damages from Apollo.
In a court filing Friday, Cooper Tire said it intends to seek damages against Apollo, and it suggests holding a conference with the court and Apollo in January. The “January” reference is huge. For months, Cooper has been racing to get Apollo to complete the deal by Dec. 31.
“Effectively the $35-per-share (or $2.5 billion) deal is all but dead,” said Kirk Ludtke, managing director of CRT Capital Group, Stamford, Conn.
Under terms agreed to by both companies, either side can abandon the deal without penalty if the purchase is not completed by Dec. 31 and if the company walking away is not at fault.
Apollo would have to pay Cooper $112.5 million if it backed out without legitimate reason or if it was to blame for missing the Dec. 31 deadline. But Cooper Tire has failed to persuade Delaware Chancery Court Vice Chancellor Sam Glasscock III that Apollo is to blame. Glasscock last month ruled that Apollo was making reasonable efforts to complete its purchase of Cooper.
The letter submitted to Glasscock on Friday marks a new phase in the Cooper-Apollo saga, analysts said.
“They (Cooper Tire leaders) finally have given into the idea they can’t get Apollo to close on the $35 (per share, or $2.5-billion) deal,” said Keith Moore, managing director and event driven strategist for MKM Partners in Stamford, Conn. “Basically they are saying further court action will seek damages instead of making Apollo pay $35 per share. They are saying the deal is done.”
Asked whether it has given up on the deal for $35 per share, Cooper issued a statement which summarized recent court filings but did not address the prospects of the $35-per-share price.
Moore said Cooper might seek damages equal to the difference between $35 per share and Cooper’s existing stock price. On Friday, Cooper stock closed at $22.20, or $12.80 below $35, for example, so that would translate to roughly $835 million in damages.
But Moore doubts that Cooper will win much money.
“Personally I think it’s a very low probability,” he said. “Extremely, extremely low probability … but I think that’s what they are going to try to do.”
Ludtke also characterized Cooper’s chance of success as “unlikely.”
Apollo already convinced Glasscock it was using its best efforts to complete the deal.
Financing for the heavily-leveraged deal was not available anyway for two reasons.
First, Cooper Tire has been unable to report third-quarter financial information because it cannot access financial information about its joint venture plant in China, which opposes the Apollo deal. The Chinese businessman who operates the plant has orchestrated a lockout of top Cooper executives and a boycott of production of Cooper-brand tires.
The other obstacle to the deal was the lack of a labor agreement between Apollo and unionized Cooper Tire workers in Findlay and Texarkana, Ark. An arbitrator ruled in September that before the Cooper purchase could close, Apollo had to reach a pact with the union. A labor agreement has not been reached yet.
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