Apollo files countersuit against US firm over stalled merger
16 Oct 2013
In a statement on Tuesday, Apollo Tyres said the company's response to the complaint filed by Cooper detailed the US company's failure to provide information under the merger agreement.
This was partly due to its lack of control over its Chinese subsidiary, Cooper Chengshan Tire, as well as Cooper's breach of several representations, warranties and covenants in the merger agreement, it said.
Apollo filed its reply and the counterclaim on Monday.
Apollo Tyres Ltd has earlier said its lenders were unlikely to approve its bid for Cooper Tire & Rubber unless the $2.5 billion price tag was cut to take account of unresolved labour disputes, and sought a price cut.
That request prompted US lawsuit filed by Cooper asking the Indian company to close the deal "expeditiously".
Responding to a complaint filed by Cooper Tire with the Delaware Court of Chancery on 4 October, Apollo has denied allegations it sought to delay an agreement with United Steelworkers, which represents Cooper employees at its Ohio and Arkansas facilities.
Apollo said it had worked diligently to reach a settlement with United Steelworkers. The negotiations were aimed at enabling Cooper overcome a United Steelworkers injunction prohibiting Cooper from sealing the merger.
"Apollo also asserted affirmative defences, including that conditions precedent to closing had not been satisfied because the marketing period for the financing, central to Cooper's claims in its complaint, had never commenced and that Cooper had failed to meet its contractual obligations under the merger agreement," the company said in its statement.
According to Cooper, Apollo wanted a price renegotiation "far greater than the $2.5 reduction it had earlier proposed and, at one point, referencing $8 or $9 a share".
In an all-cash deal announced in June, Apollo had agreed to buy Cooper at $35 a share; the deal was to be completed by the end of this year. Apollo had paid a 43 per cent premium to Cooper shares' 30-day weighted average price as of June.
Cooper said, "The situations with United Steelworkers 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."
Last week, the American company received a favourable decision from the Delaware Chancery Court, which granted Cooper's request for an expedited hearing of its 4 October complaint.
If the deal is terminated as a result of a contractual breach by Apollo Tyres, the American company could pursue financial damages much beyond the $112.5-million breakup fee in original agreement made in June this year.
On the other hand, Cooper Tire would have to pay Apollo at least $50 million if it fails to close the deal.