By LOU WILIN
It was a difficult year for Findlay-based Cooper Tire & Rubber Co.
It started with cheap Chinese tire imports puncturing Cooper’s market share and sales.
Then in June, Cooper announced its planned $2.5 billion sale to Apollo Tyres of India. Cooper Chief Executive Officer Roy Armes called the heavily-leveraged deal a compelling one, merging complementary companies into the world’s seventh-largest tire maker.
But by year-end, Cooper called off the sale.
That was a nod to two realities blocking the deal: financing had been sabotaged by a disgruntled Cooper partner in China, and Apollo had failed to reach a labor agreement with unionized Cooper workers in Findlay and Texarkana, Ark. The conditions necessary to close the deal were unmet by a Dec. 31 deadline set by both Cooper and Apollo.
Three weeks later, investors sued Cooper in federal court, claiming top officials misled investors about the Apollo takeover and caused them “enormous financial losses” when the deal collapsed. The lawsuit claims Armes and Chief Financial Officer Bradley Hughes, “in the hopes of closing that transaction and enriching themselves … concealed from investors the extraordinary risks that ultimately doomed the transaction and which have caused permanent damage to Cooper’s business.”
The Apollo deal ran into trouble shortly after it was announced. Investors and analysts criticized it because of the debt load needed to pay for it. Apollo stock dropped more than 30 percent within two weeks. Cooper and Apollo leaders tried to reassure skeptics through the summer.
Meanwhile, more trouble was brewing behind the scenes. The chairman of a Chinese joint venture with Cooper registered his objections to the Apollo deal with both Cooper and Apollo leaders. In fact, days after the deal was announced, Chairman Che Hongzhi unsuccessfully tried to outbid Apollo, Forbes India has reported. Cooper has rejected that report.
In any event, leaders of the Cooper Chengshan Tire factory refused to manufacture Cooper-brand tires. More critically, they began withholding financial information and blocked Cooper executives from the plant. The withholding of information prevented Cooper Tire from filing third-quarter financial statements, which were required by lenders before they would release money for the heavily-leveraged deal.
Cooper tried to force Apollo to complete the deal while second-quarter financial statements still had currency. In early October, Cooper asked a court in Delaware, where it is incorporated, to force Apollo Tyres to complete the purchase. Cooper claimed Apollo was showing buyer’s remorse and using the China troubles and labor difficulties in the United States as excuses to escape the deal.
The judge sided with Apollo, saying it was making reasonable efforts to close the sale.
So with the Apollo deal dead, Cooper is moving on. It is seeking to end or mend its fractured partnership in the Chinese plant. In the coming weeks, Cooper or Chengshan Group will buy the other’s interest in their joint venture, or they will agree to keep the current structure, in which Cooper owns 65 percent.
Since the Cooper-Apollo Tyres deal unraveled, Chengshan has been giving Cooper financial information and is preparing to resume production of Cooper-brand tires.
Wilin: 419-427-8413 Send an E-mail to Lou Wilin
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