Boston, MA 12/31/2013 (wallstreetpr) – Cooper Tire & Rubber Co (NYSE:CTB) announced that its deal with India’s Apollo Tyres Ltd (NSE:APOLLOTYRE) is not going to happen. The company claimed that, financing as per the agreement was not available and for that reason, there was no sense in pursuing the deal. The announcement at an investor conference call came as a surprise, but the aftermath was never a surprise.
The two companies have shown indications of seeking legal remedies over the botched merger deal. They accuse each other of breaching the agreement. It was Cooper Tire & Rubber Co (NYSE:CTB) which first sought legal redress in the U.S. court in Delaware but it lost its case.
The deal
Apollo Tyres Ltd (NSE:APOLLOTYRE) had sought to buy Cooper Tire & Rubber Co (NYSE:CTB) for about $2.5 billion. This suggested about $35 a share of Cooper in June. However, the deal has been dragging and signs of difficulties started appearing just as soon as the deal was made public.
It started with the objection to the merger deal by the partner of Cooper Tire & Rubber Co (NYSE:CTB) in a Chinese venture. Then it emerged that Apollo is being slow in meeting its part of the bargain, and things have been acrimonious since then.
Cooper Tire & Rubber Co (NYSE:CTB) is now pursuing $112.5 million against Apollo Tyres Ltd (NSE:APOLLOTYRE) in reverse termination fee and related damages. However, Cooper Tire & Rubber Co (NYSE:CTB) is also liable to about $50 million in termination fee to Apollo as part of the initial agreement. So it is this compensation fees that remain the main friction areas between the two parties.
Hopes dashed
It was the hope of Apollo Tyres Ltd (NSE:APOLLOTYRE) to takeover Cooper Tire & Rubber Co (NYSE:CTB) to expand its market in the U.S. The company has been seeking debt funding from various U.S. lenders including Morgan Stanley (NYSE:MS).
But again, Apollo investors never fully endorsed the deal as they considered it too expensive to pursue at this time. However, the deal was no doubt going to boost the company’s revenue, and possibly the bottom line.
As for Cooper Tire & Rubber Co (NYSE:CTB), the stock has suffered investors’ wrath following the cancelation of the deal.
