Cooper Tire to sell majority stake in Chinese JV to partner Chengshan
28 Nov 2014
US-based Cooper Tire & Rubber Co, the target of a failed takeover by India's Apollo Tyres, yesterday agreed to sell its majority stake in Chinese joint venture to partner Chengshan Group for $284.5 million.
State-owned Chengshan announced that both companies have reached an agreement for the Chinese tyre maker to buy the 65-per cent stake held by Cooper in the 2006 joint venture.
Last year, Apollo Tyres, India's largest tyre manufacturer, agreed to buy Cooper for about $2.5 billion that would have enabled the Indian company to emerge as the world's seventh-largest tyre maker. (See: Apollo Tyres to acquire Cooper Tire & Rubber Co for $2.5 bn)
But no sooner was the deal announced, the merger faced opposition from the United Steelworkers Union and more than 5,000 workers at Cooper's joint venture in China, who feared that the acquisition might worsen the JV's financial strain and harm their interests.
Apollo had offered to buy out Chengshan's stake in the JV for around $200 million, while Chengshan had demanded $400 million.
When Cooper filed a court case forcing Apollo to close the deal, the Gurgaon-based tyre maker said that Cooper does not even know what is being produced or sold at the Chinese venture as Chengshan did not even allow Cooper's management to enter the factory or access financial data. The workers at the JV plant refused to make Cooper-branded tires.
Apollo alleged that Cooper had failed to disclose that it did not have control over its Chinese joint venture, which accounts for a quarter of its $4.2-billion earnings.
The lockout at the Cooper's Chinese JV factory was one of the stumbling blocks in closing the deal and the transaction failed after Cooper lost a court case.
Chengshan and Cooper agreed in late January to resume production and operations of the joint venture and agreed to give Chengshan the option of buying out Cooper's stake or selling its own in the joint venture.
Chengshan said that the new company would be formed and be named Pulin Chengshan (Shandong) Tire Co. Ltd and the transaction will be completed by the end of November.