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Apollo Tyres’ plan to enter the American and Chinese markets crashed on Monday after Cooper Tire & Rubber Co terminated the $2.5-billion (Rs 15,460 crore) merger agreement announced in June.
The termination follows a bitter litigation between the two sides over the failure to reach an agreement with Cooper’s employee unions.
Apollo, which ranks 16th in the global market, would have jumped to seventh position had this deal gone through. More important, the new market would have helped Apollo make up for the declining revenues in India.
Calling off the deal, Roy Armes, Chairman, CEO and President of Cooper, said: “While the strategic rationale for a business combination with Apollo is compelling, it is clear that the merger agreement both companies signed on June 12 will not be consummated by Apollo and we have been notified that financing for the transaction is no longer available.”
Break-up fee It is not clear whether Apollo will have to pay the break-up fee of $112 million, but Armes said the Indian company has breached the merger agreement, and Cooper will continue to pursue legal steps.
An Apollo spokesperson said the company is “disappointed” by Cooper’s attempt to terminate the merger deal, and vowed to “pursue legal remedies for Cooper’s detrimental conduct”.
In October, Ohio-based Cooper had approached a Delaware court to enforce the buyout agreement, saying Apollo had failed to close the deal on the scheduled date of October 4.
Apollo, on its part, did not want to close the deal before Cooper resolved issues with the union, United Steel Workers (USW), and a strike involving a Cooper joint venture with China’s Chengshan Group.
The US firm had accused Apollo of using delaying tactics in finalising an agreement with the USW, which represents Cooper employees at its plants in Findlay, Ohio, and Texarkana, Arkansas.
Apollo said these two developments were not expected at the time of the deal, and as a result, sought to cut the price of the deal. Cooper, on the other hand, said Apollo was aware of the risks.
On September 13, an arbitrator ruled that as a result of the pending merger, Cooper and Apollo must enter into new agreements with the union before closing. But Cooper went to the Delaware Supreme Court, seeking a ruling to expedite the merger prior to December 31.
Apollo disappointed “Apollo is disappointed that Cooper has prematurely attempted to terminate our merger agreement. Cooper has been unwilling to work constructively to complete a transaction that would have created value for both companies and their shareholders,” said the Apollo spokesperson. “
>ronendrasingh.s@thehindu.co.in
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