Cooper cancels plan for merger

Apollo bid low, tiremaker says

Cooper Tire & Rubber Company has pulled out of its pending $2.5 billion merger with Apollo Tyres of India.

Financing for the deal is no longer available, according to Cooper, and the two manufacturers have been at odds since the deal was announced by Apollo more than six months ago. Cooper, whose Miller County plant is the largest employer on the Arkansas side of Texarkana, decided to pull out Monday.

“This was, of course, a difficult decision for us to make, as a business combination with Cooper and Apollo is compelling for many reasons,” Cooper Chief Executive Officer Roy Armes said during a conference call with investors. “At the same time, despite the significant efforts and resources we have applied to making this merger happen, it is a reality that the agreement both companies signed on June 12 will not be consummated by Apollo.”

Negotiations hit a snag when Apollo sought a lower purchase price than the originally agreed upon $35 per share. Apollo cited difficulties in reaching an agreement with the United Steelworkers union when asking to pay less than it originally offered.

In October, Cooper, which is headquartered in Findlay, Ohio, sought a court order in Delaware that would require Apollo to complete the merger before a deadline today. Chancery Court Judge Sam Glasscock III ruled in favor of Apollo last month, and Cooper lost an appeal to the Delaware Supreme Court earlier this month. The company is registered in Delaware.

Glasscock said at the time that Cooper had failed to “demonstrate a present entitlement to specific performance” and was not eligible to collect on the money Apollo offered. Apollo originally faced an Oct. 4 deadline to complete the purchase and had asked to lower its offer by $9 per share.

Although the merger is dead, it is likely legal wrangling will continue. Apollo was to receive a $50 million termination fee if the deal fell through, and Cooper was entitled to $112.5 million if the sale was not carried out. Cooper Chief Financial Officer Bradley Hughes said in a teleconference with investors he did not believe the company owed Apollo the $50 million.

Cooper, Hughes said, is still seeking a ruling from Delaware Chancery Court as to whether Apollo “used its reasonable best efforts” to negotiate with the United Steelworkers. Cooper also is asking the court to consider “whether other conditions to closing were met.”

“Final resolution will be determined by the court,” Hughes said of the possibility one side owes the other a termination fee.

Representatives for Apollo could not be reached for comment.

Apollo, in a statement to The Courier newspaper of Findlay, said it was considering legal action and had made “exhaustive efforts to find a sensible way forward over the last several months.”

Cooper officials said during Monday’s call that the company would consider future merger opportunities. First, though, Cooper will turn its attention to its Chinese operation, Cooper Chengshan Tire Co. Work there halted in July as employees protested the merger, according to a Bloomberg News report.

“Addressing the issues at CCT … is our top priority in the near term,” Armes said. “The situation there was driven by the merger agreement and with the agreement now terminated, Cooper is working independently to restore normal operations at CCT.”

How or if the aborted merger will affect workers in Texarkana is unclear. Cooper employs 1,653 in Texarkana, making it the third-largest employer registered with the Texarkana Chamber of Commerce, which serves both the Arkansas and Texas sides of town. Apollo and Cooper saidat the time the deal was announced that it was expected to have no impact on manufacturing in the U.S.

Armes said he expected the company to have a profitable 2014, which will mark Cooper’s 100-year anniversary. Cooper reported net income of $35 million in the second quarter of 2013 and a “record” operating profit of $166 million for the first half of 2013, Armes said. Cooper reported a company-high $4.2 billion in 2012 sales and has “a strong base,” the CEO said.

“Cooper is pleased to be in the position to have a strong, profitable company, a solid business model and a strategy that we are excited about pursuing as we enter 2014, our company’s 100-year anniversary,” Armes said. “… We willcontinue building our business and pursuing the paths and actions that we believe will deliver value for our stockholders.”

Shares of Cooper stock closed at $24.20 Monday on the New York Stock Exchange, up $1.24 from Friday.

Business, Pages 21 on 12/31/2013

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