Published on November 21, 2013

Editorial: Cooper, Apollo deal devolves from idyllic start

Nobody probably envisioned the mess that would become of Apollo Tyres Ltd.'s $2.5 billion offer to buy Cooper Tire & Rubber Co. when the deal was first announced back in June.

At that time, everything was rosy. The Indian tire maker was attracted to Cooper because of how "successful" the firm was and the opportunities it brought for instant growth and credibility in North America.

Cooper Chairman and CEO Roy Armes said the board viewed the deal as a "compelling value" with his firm's shareholders getting a 40-percent premium on the share price at the time. And the combination of Apollo and Cooper was seen as one with no geographic overlapping and an entity that had plenty of room to grow.

What a difference five months makes. Now the two "perfect" marriage partners are in court before the wedding even has been completed.

Depending on whom you believe, either Apollo dragged its feet in negotiating new agreements with the United Steelworkers, leading to a request for a reduction in the per-share price of the acquisition. Or Cooper overstated its long-term financial outlook and downplayed the possibility of a strong reaction to the proposed deal by its Chinese joint venture partner.

As for that reaction, although Cooper owns 65 percent of Chengshan (Shandong) Tire Co. Ltd., the Chinese company apparently wanted to bid on Cooper itself, and now the venture no longer makes Cooper brand tires and most of the U.S. firm's executives are barred from the plant.

That leaves the court to figure out the allegations. Cooper filed suit, asking that Apollo be forced to complete the merger as agreed. When the judge ruled that Apollo had not breached the agreement, Cooper appealed.

What's most interesting is that despite all the difficulties, Apollo still wants to proceed with the purchase. If that does happen, at least now nobody will be blind to all the flaws of what was once viewed as a perfect pairing.

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