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TB EDITORIAL: Cooper-Apollo saga—few winners

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AKRON (Jan. 8, 2014) — There are few winners in the now-defunct effort by India’s Apollo Tyres Ltd. to purchase Cooper Tire & Rubber Co.

Cooper decided Dec. 30 to pull the plug on the all-cash, $2.5 billion merger agreement—and the ripples from that action have just begun.

While there may be casualties in the failed transaction, the exceptions might be North American tire dealers and workers in Cooper’s Chinese joint-venture plant. And don’t forget the lawyers.

Many dealers were upset that another American tire maker was being taken over by a foreign firm. They’ve also seen their fill rates from Cooper decline as the company struggled with the lockout at its Rongcheng, China, plant.

Now they have hope that Findlay, Ohio-based Cooper might remain independent, American-based and, to help replenish the tire pipeline, soon return to making Cooper-branded tires at its Cooper Chengshan Tire joint-venture factory in Rong¬cheng, where the company is trying to regain control after workers went on strike Aug. 2, 2013, to protest the Apollo takeover.

If it succeeds, that would help repair the financial damages left over from the proposed merger.

Cooper shareholders, meanwhile, have to be disappointed that the 40-percent premium they expected to accrue from the deal has all but vanished.

Apollo, for its part, loses in its bid to gain manufacturing and sales distribution in North America, Europe, China and Central America and, in the process, become one of the world’s 10 largest tire manufacturers. Combined sales of Cooper and Apollo, ranked as the globe’s 11th and 16th biggest tire makers, respectively, in 2012 would have been around $6.6 billion—good for No. 7 in the world rankings.

What’s left is the legal wrangling over who will pay whom in damages and how much money that will be. Both companies already have said they intend to pursue legal claims against each other, so their wrangling likely will continue for some time.

True, Apollo’s takeover plans for Cooper looked good on paper when the merger was announced in June 2013, but the deal appeared to struggle almost from the day it was announced.

Analysts questioned whether the smaller Apollo had the financial wherewithal to purchase the larger company. They called the bid for Cooper “overambitious” and “risky” based on the amount of debt Apollo would incur.

This uneasiness was reflected in Apollo’s stock price, which declined by 25 percent the day the merger was announced.

Along the way, the two companies struggled to complete different requirements of the transaction, filing lawsuits against each other to support their respective positions. Not a good sign.

This was a deal just not meant to be, but it may not be the end of the story. Cooper could well pursue other merger opportunities, as most likely will Apollo. Stay tuned.

This editorial appears in the Jan. 6 print edition of Tire Business.

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