Apollo Tyres Ltd. is seeking to cut its $2.5 billion offer to buy Cooper Tire & Rubber Co. after U.S. and Chinese workers challenged the takeover plan. The shares of Apollo rose.
Apollo said Cooper acknowledged the $35-a-share offer should be reduced and that "the issue now is by how much," Gurgaon, India-based Apollo said in a statement yesterday. Findlay, Ohio-based Cooper denied it agreed to any need to cut the price.
Talks to complete the largest acquisition by an Indian company in North America are souring amid opposition from U.S. and Chinese workers. Apollo has said it would plan to partly fund the purchase through a $1.88 billion sale of high-yield bonds issued by Cooper and a $450 million bridge loan.
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"Both Apollo and Cooper are trying to outplay each other because since the deal was announced, the rupee has depreciated and investors have expressed concern about the ability to service the debt," said Surjit Singh Arora, an analyst at Prabhudas Lilladher Pvt. in Mumbai. "If the deal doesn't go through, the market will give it a thumbs up."
Shares of Apollo rose as much as 3.9 percent. They traded at 68.65 rupees, up 3 percent, poised for the biggest gain since Sept. 20, as of 11:17 a.m. in Mumbai. Cooper shares have fallen to $29.51, or 16 percent below the offer price, amid concerns about the deal, which was first announced on June 12.
The rupee has declined more than 6 percent against the U.S. dollar since the two companies announced the deal.
Cooper last week filed a complaint to a Delaware court to expedite Apollo's completion of the purchase, triggering a response by the Indian company that Cooper is being unreasonable in rushing the deal and failing to provide assurances about its Chinese venture.
Cooper's request to the court is "inexplicable and can only be seen as a diversionary smokescreen or an unfortunate acknowledgment that Cooper will be unable to meet its obligations," Apollo said in a statement yesterday.
Cooper said it hasn't agreed to any price cut and that the company is acting in the best interest of shareholders.
In yesterday's statement, Apollo said it hired advisers to assess the financial cost of requests made by the United Steelworkers, which represents employees at two Cooper plants, and that Cooper's "accelerated timeline" to settle with the U.S. workers is unreasonable. Apollo also said that Cooper has failed to provide assurances that it can provide financial statements for its Chinese unit and that it's in compliance with the acquisition agreement.
China Venture
Workers at Cooper's majority-owned Chinese venture are still refusing to make products for Cooper since they went on strike July 13, and the U.S. company is unable to access operational and financial information there. Cooper's Chinese partner, Chengshan Group Co., has filed a lawsuit for the dissolution of the venture, saying the sale to Apollo would undermine the venture's operations. Cooper has said the litigation lacks merit.
"Cooper's inability to access the facilities of its Chinese subsidiary, to determine what products this subsidiary is producing or to whom those products are being sold, to track or control how its funds are being spent or even to access operating or financial information, either physically or remotely, goes well beyond any typical work stoppage," Apollo said. "Cooper has misrepresented its management and control of this asset to Apollo and to its own shareholders."
Cooper said it's working to resolve its issues in China and that Apollo should expedite a resolution with the U.S. union workers.
"The situations with the USW and the joint venture partner and union in China are a direct result of the merger agreement, and are risks Apollo assumed under the merger agreement," Cooper said in a statement. "Cooper looks forward to closing this compelling transaction."
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