Del. court rules for Apollo in 'breakup' fee suit

AKRON (Nov. 3, 2014) — The Delaware Chancery Court has ruled against Cooper Tire & Rubber Co. in Cooper's bid to recoup a $112 million breakup fee related to the failed $2.5 billion merger deal with India's Apollo Tyres Ltd.

In a statement Apollo Tyres said the “ruling vindicates our consistent stand that even as Apollo Tyres made exhaustive efforts to complete the deal, Cooper failed to comply with its contractual obligations because it was unable to control its largest subsidiary.

“This led it to hastily litigate and ultimately led to the failure of a transaction that would have benefitted Apollo and Cooper's shareholders.”

Delaware Chancery Court Judge Sam Glasscock III ruled late last week that Cooper had not satisfied the closing conditions of the deal and therefore the breakup fee terms were negated. The case has been under review since Jan. 27 when the court ruled it would proceed with a decision on the Apollo entities' motion for declaratory judgment.

The parties presented their arguments July 9, Cooper said in its second quarter 10Q filing.

In its own statement, Cooper said the court's ruling “noted that what took place at our [Cooper Chengshan Tire (CCT)] joint venture after the merger was announced was unanticipated, and neither Apollo nor Cooper caused it to occur.”

A sticking point in the proposed Cooper-Apollo merger was a labor action at CCT in China that led to the suspension of production of Cooper-brand products and a refusal by management there to share pertinent financial information.

“Nonetheless,” Cooper said, “the court found that [the situation at CCT] prevented Cooper from complying with its contractual obligations necessary to close the merger.  As a result of the ruling, Cooper is not entitled to the reverse termination fee.

“While the decision was not what we sought in the case, our company remains focused on running our business and meeting the needs of our customers around the globe.”