The sale of Cooper Tire to India’s Apollo Tyres has been called off after difficulties associated with completing the deal.
Cooper said it made the decision after Apollo’s lenders refused to extend their financing commitments beyond the end of 2013.
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Apollo had planned to borrow almost the entire purchase price – in a deal once valued at US$2.5bn – from Morgan Stanley, Deutsche Bank AG, Goldman Sachs Group and Standard Chartered Bank Ltd.
“Apollo has made exhaustive efforts to find a sensible way forward over the last several months. However, Cooper has been unwilling to work constructively to complete a transaction that would have created value for both companies and their shareholders,” Apollo said in a statement.
The merger, which would have been the largest Indian takeover of a US company, was plagued by controversy.
Following the June announcement of the sale, a key Cooper-controlled factory in eastern China rebelled as workers went on strike and lobbied one of Apollo’s banks, Standard Chartered, to reconsider its loan commitment. By late July, factory executives had revoked Cooper’s access to the joint venture’s financial records and stopped producing Cooper-branded tyres.
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By GlobalDataApollo claimed the lockout was orchestrated by Cooper’s minority joint venture partner, Che Hongzhi. Mr Che, a powerful local businessman, had previously been in talks to acquire Cooper himself.
In the US, there were also setbacks to the merger plan. The United Steelworkers (USW) union said the takeover by Apollo entitled the union to a new collective bargaining agreement and an arbitration ruling in September backed the USW. That hiccup in the timeline led to accusations on the merger deal’s completion price. It was suggested that Apollo could use the union setback to renegotiate the price.
Cooper claimed its executives were cut out of negotiating sessions and that Apollo made no serious effort to strike a deal with the USW, preferring to drag out the deal’s completion amid ongoing financial uncertainties.
Cooper has also said that Apollo’s failure to close the deal has cost it millions of dollars in lost revenue and damaged customer relationships, with the two companies now set for legal wrangling over damages.
The two companies must file updates with the Delaware court by January 10.
