AKRON (Oct. 11, 2013) —The Cooper Tire & Rubber Co.-Apollo Tyres Ltd. proposed marriage is off to a rocky start — and things could go downhill from there.
On Oct. 4, just four days after Cooper's shareholders approved Apollo's $35 per share offer, Cooper filed suit in Delaware Chancery Court to compel Apollo to "expeditiously close the pending" $2.5 billion merger of the two companies.
In the suit Cooper accuses Apollo of attempting to renegotiate or even scupper the firms' merger pact by "seeking to delay an agreement" with the United Steelworkers (USW) union at two Cooper U.S. plants—as ordered by an arbitrator on Sept. 13 after the USW sought arbitration, claiming the sale to Apollo would violate successorship provisions of the union's contracts with Cooper.
Apollo, in a statement, claims that arbitrating the contracts at these two plants would involve making "material concessions" to the USW that would necessitate the need for financing or financial concessions in the terms of the deal with Cooper, and that Cooper "misrepresented its management and control" of the Cooper Chengshan (Shandong) Tire Co. Ltd. subsidiary in China to Apollo and to its own shareholders.
"Apollo finds it implausible that Cooper, having failed to resolve these issues for several months, would realistically expect to force Apollo to concede material issues on Cooper's accelerated timeline," the company said.
Apollo is seeking to roll back its $35 per share offer by at least $2.50 a share and perhaps as much as $9 a share, Cooper claims in its suit.
The Delaware Chancery Court has agreed to hear the case in early November, Cooper said.
Apollo also accuses Cooper of "reckless hopefulness, bad faith or worse" in its financial forecasting for the current fiscal year. According to Apollo, Cooper forecast it would report $380 million in operating income this year on sales of $4.3 billion. It revised these figures downward three times over seven weeks, to sales of $3.4 billion and operating income of $257 million—declines of 25 and 48 percent, respectively.
"…these persistently missed forecasts have eroded any shred of credibility (Cooper) has with us," according to a letter to Cooper signed by Apollo's Vishal Mittal.