FINDLAY, Ohio—For Cooper Tire & Rubber Co.'s board of directors, accepting Apollo Tyres Ltd.'s offer to buy Cooper was a matter of "compelling value," according to Roy Armes, Cooper chairman, CEO and president.
"Apollo approached us last year with an offer that we determined wasn't in our best interest, so we walked away from it," Armes said.
"When they came back this time (with their offer of $35 a share), the board viewed this is a 'compelling value,' " he said. "It's a great deal for our shareholders, who have endured years of our share price being undervalued."
Armes said the offer price premium of roughly 40 percent is one of the highest of any major deal in the past decade.
With the bulk of the funding for the deal coming from Standard Chartered, backed up by support from Morgan Stanley Senior Funding Inc., Deutsche Bank Securities Inc.,and Goldman Sachs Bank USA, Armes said it gave Cooper's board the confidence that Apollo could conclude the deal.
Armes said the deal will be good for Cooper's dealers—who will have access to a broader selection of brands and, eventually, product offerings in the farm and off-the-road sectors—and employees—who should take note that Apollo is on record saying it has no intentions to close any facilities, will recognize existing collective bargaining agreements as well as maintain compensation and benefit levels for non-union employees.
The next step in the process is to satisfy necessary Securities and Exchange Commission regulations and wait for the various regulatory bodies to review the deal. That should take no more than six months, he said, and hopefully more like three to four months.
Cooper also needs to hold an extraordinary meeting of shareholders, Armes said, where shareholders will be asked to approve the deal. That meeting is yet to be scheduled.
Armes said concluding the deal was made easier because Cooper and Apollo have worked together on a couple of matters in recent years, including Apollo making some tires for Cooper in India, Apollo being Cooper's distributor of record in South Africa and groundwork the companies did together evaluating a possible joint manufacturing venture in eastern Europe.
Armes said he is confident the companies can realize $80 million to $120 million in synergy savings per year based on scale efficiencies available and the lack of overlapping market presence.
The firms can use their combined resources, for example, to explore new markets, such as Latin/South America, where neither has much if any presence, he added.
Armes did not say definitely whether he'd stay on after the purchase/merger takes place, but said he's firmly committed to ensuring a smooth transition.
He also stressed that one of the key attributes Apollo saw in Cooper is the firm's management and people assets.