Beyond Apollo

There have been tough lessons learned from the failed merger of Cooper Tire & Rubber Co. and India’s Apollo Tyres, a partnership that would have been the largest Indian acquisition of a U.S. company.
Earlier this week, Cooper terminated an agreement with Apollo, which had agreed to buy the Findlay-based company for $2.5 billion before a series of setbacks made it all but impossible.
The merger agreement, which had been approved by Cooper shareholders Oct. 31, was set to expire on Tuesday.
While it’s conceivable the two companies could restructure the deal, that doesn’t seem likely at this point. Both have said they’ll pursue monetary damages from the other due to the botched deal, and the once-promising relationship appears to be over.
Cooper Chief Executive Roy Armes said it’s now time to move Cooper forward, something that will take considerable effort.
Since June, when the merger plan was announced, Cooper has been in a sort of holding pattern while dealing with issues related to its union plants in Findlay and Texarkana, and with Cooper’s joint venture plant in China.
At one point, the United Steelworkers union filed grievances with Cooper, contending that it should be allowed to approve a change in ownership, and used that as an opportunity to try to renegotiate its contract.
In November, the Findlay workers approved a new agreement with Cooper that extends their contract through February 2020. However, minimum production guarantees run only through February 2017.
Cooper has also struggled to regain control of its Cooper Chengshan (Shandong) Tire Co. factory in Rongcheng, China, which has about 5,000 workers.
The Chinese have protested the merger by withholding financial information, blocking Cooper executives from the plant, and refusing to manufacture Cooper-brand tires.
That cut into Cooper’s revenue and prevented the company from providing Apollo with financial information it needed to secure financing for the deal.
The problems with the unions and in China led to a delay in closing the deal and, in October, Cooper filed a complaint in Delaware Chancery Court seeking to force Apollo to complete it.
Cooper indicated it would pursue damages against Apollo. But because Cooper walked away from the deal, it may not receive a breakup fee from Apollo unless a judge rules Apollo broke the agreement.
Apollo has also said it will pursue remedies in court.
The backlash in China showed how complicated competing in the global marketplace can be, and how instability at union plants can work to jeopardize a multibillion-dollar deal.
The past few years have been difficult ones for tire builders at the Lima Avenue plant. First there was a four-month lockout in 2011-12, and then the proposed merger, which some workers believed would eventually lead to an end of the Findlay operations and their jobs.
Both management and the rank and file must work to restore trust that seems to be lacking these days.
United Steelworkers Local 207L President Rod Nelson said Monday’s announcement by Cooper ends a long “distraction,” and said the goals should now be keeping the plant here and growing the business with high-quality, low-cost tires as the union focuses on job security and good wages.
Armes admitted: “It is time to move our business forward.”
We are confident the entire Cooper team can do the things necessary to secure the Findlay plant’s long-term future and restore and grow Cooper’s position of strength in the global tire market.

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