A US court has ruled that Apollo Tyres has not breached its contractual obligation for the delayed buyout of Cooper Tire dismissing the allegation that it is suffering from ‘buyer’s remorse’ even as the Indian tyremaker continues to seek a cut in deal value.
The firm disclosed that a partial ruling issued last week by the Delaware Court of Chancery, in relation to the complaint filed by Cooper Tire, absolves it of wrongdoing in the pending closure of the M&A transaction. The deal has been mired by two developments, including a pending settlement with labour union United Steelworkers (USW) and troubles at Cooper’s Chinese venture.
"We are pleased that the Delaware Court has found that Apollo is not in breach of its merger agreement with Cooper Tire. Furthermore, the court found that Apollo has used 'reasonable best efforts' to negotiate with the USW and that, contrary to Cooper's claims, 'nothing in Apollo's conduct indicates buyer's remorse.' Apollo continues to believe in the merits of the combination and is committed to finding a sensible way forward,” it said in a market disclosure.
The pending merger was announced on June 12 after the boards of directors of both companies unanimously approved the sale of Cooper to a wholly owned subsidiary of Apollo for $35 per share, a premium of over 40 per cent to its price before the acquisition announcement, valuing the deal at $2.5 billion.
Cooper had later alleged that Apollo is seeking to delay an agreement with the USW, which represents Cooper employees at facilities in Findlay, Ohio and Texarkana, Arkansas. It added Apollo is looking to cut the deal value as it has had a ‘buyer’s remorse’ after the deal sunk its share price back in India.
It had indicated Apollo is looking to bring down the deal value by almost a quarter of the initial proposal.
Cooper is also facing a daunting challenge in China as its local partner has threatened to dissolve the business arrangement under their JV Cooper Chengshan (Shandong) Tire Company, Ltd. (CCT) in light of the proposed takeover by Apollo Tyres.
Apollo had said that it was under no obligation to close the transaction, in part because Cooper had not provided updated financial information.
As per the terms of the bid, the deal can be terminated without any financial penalty after December 31.
Apollo Tyres’ scrip was up almost 4 per cent quoting at Rs 74.45 a share in mid-day trades in a weak Mumbai market on Monday.
(Edited by Joby Puthuparampil Johnson)