FINDLAY, Ohio—Apollo Tyres Ltd. wants to cut its $35 per share offer for Cooper Tire & Rubber Co.'s outstanding shares by at least $2.50 and possibly as much as $9 a share, Cooper said in a lawsuit filed Oct. 4.
Cooper, in its suit filed in the Delaware Chancery Court the day the merger was supposed to be consummated, asks the court to compel Apollo to close the pending $2.5 billion merger of the two companies.
Cooper also asked the court to award it monetary damages from India's Apollo, in an "amount to be proven at trial," sufficient in scope to compensate it for losses incurred because of "Apollo's knowing, deliberate and material breaches of contract." It also seeks reimbursement of attorneys' fees and any other costs in connection with bringing its action.
Cooper sued in Delaware because both it and defendant Apollo Acquisition Corp.—an entity set up by Apollo Tyres for the purpose of entering into the merger agreement—are Delaware corporations.
Should Apollo opt to back out of the proposed takeover, it would face a "reverse buyout" penalty of $112.5 million, according to Cooper documents.
Apollo, according to Cooper's suit, is using arbitration-required contract negotiations with the United Steelworkers union at two of Cooper's U.S. plants and labor and management opposition to the deal at Cooper's Cooper Chengshan (Shandong) Tire Co. Ltd. subsidiary in China as reasons for seeking a reduction in its acquisition offer.
Apollo first approached Cooper on Sept. 26 with its concerns about the costs associated with the USW and Shandong Chengshan matter, Cooper said in its lawsuit, going so far as to tell Cooper that its offer at that time—four days before the scheduled Cooper shareholders' meeting to vote on Apollo's offer—was contingent on Cooper' accepting a price reduction of $2.50 a share.
Cooper does not dispute Apollo's claims that resolving the USW and Shandong Chengshan matters will result in added costs, but said in its suit that "Apollo was well aware of the potential significance of that risk allocation..." and therefore can't use these issues now as reasons for altering the agreement.
In its suit, Cooper offers additional explanations as to why Apollo is delaying closing the deal—including what it deems as "buyers' remorse" by Apollo top management, which has lost considerable paper wealth by the drop in Apollo's share price following the deal's announcement combined with the falling value of the Indian rupee.
Cooper's shares fell about 13 percent Oct. 7, to $25.81, and recovered 3.6 percent to $26.67 the next day.