FINDLAY, Ohio—Goodyear's $2.5 billion takeover of Cooper Tire & Rubber Co. will now have to overcome a trio of legal challenges recently filed in two states.
Three Cooper shareholders question the financial information released relating to Goodyear's planned acquisition in lawsuits filed in both Delaware and New Jersey.
Both companies, however, do not think the lawsuits hold water.
"Goodyear and Cooper Tire believe that the allegations in the Stockholder actions are without merit," reads a March 31 filing Goodyear made with the U.S. Securities and Exchange Commission.
The Rigrodsky Law firm of Wilmington, Del., filed two of the lawsuits, one on behalf of shareholder Shiva Stein and the other on behalf of shareholder Gilbert Griffin. The third lawsuit was filed by Halper Sadeh L.L.P., a law firm in North Brunswick, N.J., on behalf of plaintiff Jeffrey Miles.
All three lawsuits involve information Cooper filed with the SEC providing information about the proposed deal.
The document that recommends shareholder approval for the transaction "omits and/or misrepresents material information" regarding Cooper's and Goodyear's financial projections, potential conflicts of interest involving Cooper's financial adviser Goldman Sachs & Co., and the sales process, the Miles lawsuit alleges.
Also under question is "the financial analysis performed by Goldman in connection with its fairness opinion," according to the Miles suit.
Omission of material information causes the registration statement to be "false and misleading," that lawsuit states.
"The disclosure of projected financial information is material because it provides stockholders with a basis to project the future financial performance of a company, and allows stockholders to better understand the financial analyses performed by the company's financial adviser in support of its fairness opinion," the Griffin lawsuit states.
"When a banker's endorsement of the fairness of a transaction is touted to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed," the Griffin lawsuit said.
An Akron-based Goodyear spokesman said in an email that the company is aware of the lawsuits but does not have any comment. A representative of Findlay, Ohio-based Cooper could not be reached for comment.
Goodyear, however, did indicate in a separate SEC filing there might be even more legal action in the future.
"Additional lawsuits or demands arising out of the merger may also be filed or made in the future. If additional similar lawsuits or demands are filed or made, absent new or different allegations that are material, neither Goodyear nor Cooper Tire will necessarily announce them," the company's March 31 filing states.
James Picariello follows both Goodyear and Cooper as equity research analyst at KeyBanc Capital Markets.
"My only comment would be, lawsuits such as these are very common for a ~$2.5B+ deal. While I have no expertise as to the legal grounds of those lawsuits, I don't expect any material delay or impact from them with respect to the transaction closing in the second half of this year as planned," Picariello said in an email.
"We continue to view the GT/CTB deal as highly, mutually beneficial to shareholders on both sides," the stock market analyst said.
Here are the nuts and bolts of the transaction: Cooper shareholders are getting $54.36 per share in cash and stock in the combined company, a 24 percent premium over the last business day before the deal was announced in February
The deal includes $41.75 in cash and 0.907 share of Goodyear stock per Cooper share. Once the transaction is complete, current Cooper shareholders will own about 16 percent of the combined company.
The lawsuits each want to block or rescind the merger or seek award damages.