Apollo Tyres’ dream to get a foothold in the US and Chinese markets through the acquisition of Cooper Tire & Rubber Company is turning into a nightmare. The two companies have traded charges alleging that the other is breaching the terms of the $2.5-billion agreement announced in June.
The Indian tyre maker on Monday blamed Cooper for not being transparent about its holding in China. Apollo also said that Cooper was forcing an agreement with US worker’s union even as the American company itself could not agree to the terms put out by the union.
The blame-game started after Cooper on October 4 filed a plea in Delaware Chancery Court saying that the subsidiaries of Apollo Tyres be ordered to expeditiously close the deal.
But there are primarily two sticking points that have soured the acquisition agreement. Soon after the deal was announced workers at Cooper’s venture in China went on a strike protesting against a takeover by the Indian company. While Apollo has till now been saying that it was Copper’s responsibility to find a solution in China, it went a step ahead on Monday blaming the American company for withholding information.
“Apollo has asked Cooper to confirm that Cooper has sufficient control over and access to its majority-owned subsidiary in China to permit it to deliver current consolidated financial information and auditors’ comfort letters and that Cooper is in compliance with covenants and representations in the merger agreement. To date, Cooper has been unable or unwilling to provide these confirmations,” the Indian tyre maker said.Cooper has misrepresented its management and control of this asset to Apollo and to its own shareholders,” it added.
To add to the woes, the United Steelworkers (USW), the union representing Cooper employees in Ohio and Arkansas, have raised demands that could potentially jeopardise the deal. An arbitrator had ruled on September 13 that Cooper and Apollo must enter into new agreements with the union prior to closing the deal. Apollo said it has indicated to the USW in discussions over the past two weeks that it is willing to make material concessions to the USW, subject to arranging for additional financing or financial concessions.
“Cooper had been unwilling to provide similar terms to the USW in negotiations. 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,” it said.
On the other hand, Cooper said that by delaying resolution with the USW, Apollo is breaching the merger agreement. Cooper’s spokesperson told Business Line that the situations with the USW and the joint venture partner in China are risks Apollo assumed under the merger agreement.
While both sides said that they remain interested in working towards closing the deal, it is not clear how they will overcome the differences. As per the initial plan, the acquisition was supposed to have been completed by the end of this year.
Apollo Tyre’s share price went up by 4.96 per cent to Rs 69.80 at close on Monday at the BSE.