Apollo Tyres still wants to acquire Cooper Tire and Rubber. It just wants to have a little chat about the agreed upon $2.5 billion price.
Cooper filed a complaint in a Delaware court earlier this month, alleging that Apollo, based in India, was dragging its feet in closing a deal that would create the world’s seventh-largest tire company. Responding to that complaint on Tuesday, Apollo said it had tried to complete the merger on time, but that Cooper had not held up its end of the merger agreement.
Specifically, Apollo said Cooper has not provided it with required information about the business and access to its books and records. Apollo also said it was unable to close the deal because of ongoing labor negotiations with the United Steelworkers. Finally, Apollo alleged that Cooper has essentially lost control of an important part of its business in China, making it impossible to know what it is really buying.
Taken together, Apollo claims these disruptions mean that Cooper has not satisfied the terms of the merger agreement and that it cannot try and force the deal to close at the current $35 a share price.
“This is not a case of buyer’s remorse,†Apollo said in its response to Cooper’s complaint. “Apollo has long seen the strength of the strategic fit between Apollo and Cooper. It still sees that fit, and it is committed to acquiring Cooper.â€
But while Apollo still wants to do the deal, it also wants to revisit the price. Because the cost of a new contract with the steelworkers may be substantial, and because Cooper has limited control of its Chinese operations, Apollo said it was entitled to renegotiate the terms of what would be the largest ever Indian acquisition of a United States company. Apollo has pushed for new talks on price in previous statements, and reaffirmed that position in its response on Tuesday. What’s more, Apollo claims Cooper’s North American business is eroding at a surprising rate, adding further uncertainty to the price it is paying for the company.
For its part, Cooper says that Apollo knew there were risks to the deal, and that it is still obliged to go through with the deal. It noted that the material adverse change clause in the original merger agreement stated that any developments that were the result of the deal announcement could not be used as cause for Apollo to walk away. And in its recent complaint, Cooper sought to force the merger to close despite the complications. Apollo disputed Cooper’s interpretation of the clause.
What happens next is up to Vice Chancellor Sam Glasscock, the Delaware judge assigned to the case. Agreeing to fast track the case last week, Mr. Glasscock appeared sympathetic to Cooper’s complaint and set a trial for early November.
On Tuesday, Cooper said it was looking forward to seeing Apollo, its suitor, in court.
