Cooper Tire & Rubber Co (NYSE:CTB) announced the termination of its merger agreement with Apollo Tyres Ltd (BOM:500877) today.
Last June, Apollo Tyres Ltd (BOM:500877) offered to acquire Cooper Tire & Rubber Co (NYSE:CTB) for $2.5 billion in cash to create the seventh largest tire company worldwide with a total revenue of $6.6 billion.
Cooper Tire accused Apollo of dragging its feet
In October, Cooper Tire & Rubber Co (NYSE:CTB) filed a lawsuit against Apollo Tyres Ltd (BOM:500877) on allegations that the Indian tire manufacturer was delaying the closing of the merger agreement to lower the acquisition price. However, a court in Delaware rejected Cooper Tire’s claims. Back then Apollo Tyres said it was committed in “finding a sensible way forward.”
The merger agreement became complicated when Apollo Tyres Ltd (BOM:500877) demanded to reduce its $2.5 billion proposal citing that the circumstances of Cooper Tire & Rubber Co (NYSE:CTB) changed since it first entered the deal. Cooper Tire was confronted with labor problems in its operations in the United States and China. In addition, the U.S. based tire manufacture has limited financial information regarding its Chinese venture.
Cooper Tire trying to move forward
Today, Roy Armes, president and CEO of Cooper Tire & Rubber Co (NYSE:CTB) said its time for the company to move its business forward. According to him, “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. The right thing for Cooper now is to focus on continuing to build our business.”
Armes emphasized that the business model of Cooper Tire & Rubber Co (NYSE:CTB) is strong with record operating profits in the first half of the year despite challenges. He is confident that the company will continue to be profitable and end 2013 with a strong balance sheet.
“We look forward to continuing to execute on our strategy in 2014, and we have a very strong base from which to do this—brands that are respected for quality, a loyal customer base, a flexible global network of manufacturing facilities, a skilled workforce, and top technical capabilities,” said Armes.
He added that the main priority of Cooper Tire & Rubber Co (NYSE:CTB) in the near-term is to address the situation at Cooper Chengshan Tire (CCT) in Rongcheng, China. According to Armes, the issues confronting CCT was driven by the merger agreement, and the company is working independently to restore the normal operations of CCT including obtaining information necessary to resume its regular financial reporting as soon as possible
Furthermore, Armes said the company believes that Apollo Tyres Ltd (BOM:500877) violated the merger agreement and it will continue to pursue legal steps to protect its interest and shareholders.