Apollo Tyres Limited (BOM:500877), one of the leading Indian tyre manufacturers, announced on Wednesday plans to acquire the Cooper Tire & Rubber Company (NYSE:CTB) in an all cash deal for $2.5 billion. In October, Economic Times of India reported that the two companies are in talks. The deal will result in the seventh-largest tyre company in the world with sales totaling to $6.6 billion.

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Terms of the deal

As per the terms of the deal, the shareholders of Cooper will get $35 a share in cash. The per share price represents a 42.5 percent premium over the Tuesday’s closing price, and 40 percent premium over the tyre companies 30-day volume-weighted average price.

About Apollo

The deal will help the Indian firm to gain access in the U.S., which is the world’s second-largest auto market after China. Gurgaon based Apollo Tyres Limited (BOM:500877) was founded in 1972 with plants in India, the Netherlands and South Africa.

Chairman of Apollo, Onkar S. Kanwar, told in a statement “This transformational transaction provides an unprecedented opportunity to serve customers across a host of geographies” in developed as well as emerging economies globally, including European Union, India, China, Africa and Latin America.

Apollo Tyres Limited (BOM:500877)  was advised on the deal by Morgan Stanley (NYSE:MS) and Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) and the law firms Sullivan & Cromwell and Amarchand & Mangaldas & Suresh A. Shroff & Company while investment firm Greater Pacific Capital acted as strategic and financial adviser to Apollo.

About Cooper

Findlay, Ohio based Cooper Tire & Rubber Company (NYSE:CTB) was founded in 1914. The company has 13,550 employees globally, at the end of 2012. The tyre company told that it will continue to recognize its labor unions and abide with the collective bargaining agreements.

According to Cooper Tire & Rubber Co Chairman and President Roy Armes the “compelling transaction” is beneficial for the shareholders, customers and employees of both companies. The deal offers significant growth opportunities as the two firms “have almost no geographic overlap.”

Cooper Tire & Rubber Company (NYSE:CTB), with brands like Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon, is the fourth biggest tire producer in North America with a focus on passenger and light- and medium-truck replacement tires.

Cooper consulted Bank of America Merrill Lynch and the law firm Jones Day.

Shares of Cooper gained 40 percent, in the premarket trading.