The Worst, the Best, and Some Odd Couples

Ahem. Please find your seats.

It is time again for DealBook’s annual “Closing Dinner,” at which we toast and roast the world of finance and corporations â€" and look back at the year that was.

This year’s table assignments were a bit trickier than in years past. Eric Holder, the United States attorney general, asked to sit next to Jamie Dimon of JPMorgan Chase to “catch up on some unfinished business.” Preet Bharara, the United States attorney for the Southern District of New York, asked to sit next to Mr. Holder as well but also “within earshot of Steven Cohen.”

Then, out of the blue, Carl Icahn, the activist investor, tweeted that he hoped to sit next to Tim Cook of Apple. Mr. Cook, presumably having tired of Mr. Icahn’s one-track conversations, replied with “#SeatCarlWithBillAckman.” We might sell tickets to that table. We sent an invitation to Jeff Bezos, but U.P.S. didn’t deliver it in time over the holiday. If only Amazon’s new drones were up and flying.

Edward Snowden, who could not leave Russia for obvious reasons, sent his regrets along with a note he asked me to give to Mark Zuckerberg of Facebook: “Those emails with your mother before the holidays were really cute.”

It’s also nice to see Elon Musk, who just arrived, of course, in his Tesla. He has offered to cook dessert, which he promises will be a surprise flambé. (Rimshot, please!)

And Jamie, before I forget, a nice young gentleman from China asked me to pass you his résumé, but I’m not sure who his parents are. Please don’t hold it against him. (Ouch! I jest.)

A big thanks to the Winklevoss twins, who were kind enough to pay for tonight’s festivities in Bitcoin. Dick Costolo of Twitter also chipped in by paying with his company’s stock. As a token of our thanks, there’s bubble gum and tulips in all of your gift bags.

Finally, before we begin the official toasts and roasts, we are lucky to have Pope Francis here, especially given his recent critical comments about capitalism and those “wielding economic power.” We sat him next to Donald Trump.

Now, in all seriousness:

SIMPLY, THANK YOU Ben Bernanke: Please take a bow as you prepare to depart the Federal Reserve as chairman. Everyone in the nation owes you a huge thanks. You have done an extraordinary job helping the country get out of a deep recession with little help from gridlocked officials in Washington. We still have a long way to go, but considering the economic abyss we were facing five years ago â€" and the unconventional steps you have taken over the years to reduce the unemployment rate â€" it is a minor miracle we are not in worse shape.

Your first steps this month to taper the government’s bond-buying program appear to be working. Of course, there’s an argument to be made that some of your easy-money policies may have exacerbated inequality in the nation â€" most of the wealth generated over the last couple of years has accrued to those already with assets like homes or stocks â€" but it surely kept the economy from collapsing.

And if you ever think your actions weren’t appreciated enough, just think of the blunt bumper sticker that former Representative Barney Frank once joked he was going to buy, effectively saying: Things Would Have Been Worse Without Me. Your successor, Janet Yellen, has some big shoes to fill.

WORST C.E.O. OF THE YEAR This year’s prize for worst chief executive was a tie between Ron Johnson, who was ousted from J. C. Penney, and Thorsten Heins, who exited BlackBerry. Admittedly, both executives had tough turnaround assignments when they got the jobs. But both found novel ways to run their companies into the ground at breakneck speeds.

Mr. Johnson, who made his name building Apple’s retail business and liked to not-so-subtly compare himself to Steve Jobs, made the early â€" and patently wrong â€" decision to jettison Penney’s longtime customers in favor of catering to more upscale customers who never showed up.

Mr. Heins’s reign at BlackBerry was doomed from almost the first week he took the job when he declared, “There’s nothing wrong with the company as it exists right now,” even though anyone with an iPhone or Android sensed trouble. And then, rather than introduce the first model of BlackBerry’s next-generation phone with a keyboard â€" the reason so many of its customers were loyal for so long â€" he introduced a keyboardless version.

BANK C.E.O. OF THE YEAR It’s not very popular to crown a “C.E.O. of the Year” these days, and even less so the chief of a big bank, but James Gorman, the chief executive of Morgan Stanley, deserves credit for turning around an institution that only a couple of years ago was on the verge of being written off. Mr. Gorman, a straight-talking former consultant from Australia, got the bank out of its riskiest businesses, was perhaps the most vocal about tamping down compensation and refocused the firm on the staid, perhaps even boring, business of wealth management.

In the process, he may have taken Morgan Stanley out of competing head-to-head with the likes of Goldman Sachs â€" an assumption he would challenge and some old-timers would lament â€" but the firm’s turnaround has been a success.

The company’s stock has jumped 61 percent this year.

THE GANG THAT COULDN’T SHOOT STRAIGHT FINALLY DID One of the refrains we hear again and again from the business community is that Washington is creating unneeded uncertainty with its series of debt default threats and government shutdowns.

It’s not clear that praise deserves to be heaped on those who simply do their jobs, but since it seemingly happens so rarely in Washington, praise is in order to both Paul Ryan and Patty Murray for reaching a mini-budget deal without blowing up the economy again. It wasn’t a grand bargain, but it was a step in the right direction.

American-Style Start-Ups Take Root in India

MUMBAI, India â€" India has built a reputation as a notoriously tough place to do business, one that has stymied even giants like Walmart. And unlike Silicon Valley, where a decent idea can attract funding, investors in India are much more reluctant to risk their money on start-ups.

Despite such challenges, some American technology entrepreneurs are seeking to pursue the country’s untapped opportunities, even without the clout of a multinational corporation backing them.

Peter Frykman, 30, of Palos Verdes, Calif., found his network of support at Stanford University, where he was a doctoral student in mechanical engineering. With the help of an angel investor in the United States, he created a pilot study in the Indian state of Tamil Nadu in 2008 for his agricultural start-up, Driptech, which makes affordable, efficient irrigation systems for small-plot farmers.

The idea for Driptech had its origins in Ethiopia, where Mr. Frykman traveled with a team in 2008 as part of the Extreme Affordability program at Stanford, in which students tackle real-world problems. But he found that for all its flaws as an investment destination, India had much less political risk than African nations and had better infrastructure. The nation also had more subsistence farmers than all of Africa.

In 2011 Mr. Frykman moved to Pune, India, after Driptech closed a funding round led by Khosla Impact, founded by the venture capitalist Vinod Khosla. “It’s kind of unusual to start a company and then realize that the biggest opportunity is in India,” Mr. Frykman said. “We sort of did it backwards.”

India may be home to many of the largest outsourcing consulting firms, and tech-oriented cities like Bangalore have attracted global technology giants like Microsoft. But attracting American-style entrepreneurism here has happened in fits and starts.

American-based venture capital firms and the Indian units of American venture capital firms, like Sequoia Capital India, invested $172 million this year through mid-December, excluding joint ventures. That fell from $250 million in 2006, according to Venture Intelligence, a research service based in Chennai that is focused on private equity. In the latest World Bank rankings on the ease of doing business, India slipped three spots, to 134th out of 189 countries.

Some 42 venture capital firms based in the United States, however, have either opened offices in India or opened Indian units since 2006, according to Venture Intelligence.

Despite the challenges, the sheer potential in a country of 1.2 billion people with a stable middle class is enough to tempt entrepreneurs and multinationals alike to explore opportunities.

“In the earlier years after I moved to India, around 2008-10, there was astounding growth in the mobile market, with 20 million new subscribers being added to the telecom network every month,” said Valerie R. Wagoner of Modesto, Calif., 30, chief executive of the mobile marketing firm ZipDial in Bangalore. That monthly growth was nearly equivalent to the population of Australia.

Ms. Wagoner was working for eBay when she decided it was time to shift her focus to her passion: emerging markets and technology. She did extensive networking in India with executives at mobile payment providers and joined mChek in Bangalore in 2008 as head of strategic initiatives. In 2010, she founded ZipDial, whose investors include 500 Startups, a Silicon Valley seed fund; Jungle Ventures of Singapore; and the Indian firms Blume Ventures and Unilazer Ventures.

The frustrations of doing business in India include bureaucratic hurdles in licensing and making other filings, and pressure for bribes, which Americans cannot legally give. Many start-ups avoid these hurdles by catering to private clients and by making products that do not need governmental approval.

Entrepreneurs have also had to adjust business plans quickly to get around complications. Sam White and Sorin Grama, co-founders of Promethean Power, won second place and $10,000 in a business plan contest at M.I.T. in 2007 with the idea of using solar technology for rural electrification in India.

“India was the last country on my list to even visit â€" never had any interest,” Mr. White said.

Mr. Grama, 44, a Romanian-born American citizen, and Mr. White, of Boston, both eventually moved to Mumbai in 2012. They ran into problems from the start in trying to make a cost-effective solar milk chiller for villages where milk was collected for dairies.

In 2010, they spent six months building a prototype, only to have the managing director of Hatsun, India’s largest private dairy, point out that the 2,000-liter thermal battery that was used to store cold thermal energy was too big for any shed found in the villages.

Finally, they let go of the idea of being a solar company. Instead, they developed a thermal battery that is able to take advantage of the intermittent power on the grid. The battery releases a cold fluid that chills milk quickly.

Now the company has Hatsun as a client and has attracted funding from clean technology investors like the Quercus Trust, angel investors and grants by the National Science Foundation and the United States-India Science and Technology Endowment Fund, which was founded by the two nations’ governments.

“Eighty percent was our own mistakes â€" we would have faced them in any country,” Mr. White said. “But we always learned from those mistakes.”

A common complaint among the entrepreneurs was the difficulty in finding and keeping good employees. Even by Silicon Valley standards, Indian tech employees are restless. “The job market is so hot it’s not uncommon for a young person to think they can build a career by quitting within three months to get a pay raise somewhere else,” said Ms. Wagoner of ZipDial.

The tech companies have to offer salaries at the market rate or higher to attract job seekers, who prefer the stability of a conglomerate over opportunities for personal growth. In fact, Mr. Frykman said the “lack of coolness” associated with a start-up was one of the biggest surprises he encountered. For this reason, Indians are less eager for stock options than their counterparts in the United States.

To increase Indian employees’ exposure to such incentives, Ms. Wagoner has made stock ownership plans part of ZipDial’s compensation package and will give additional grants to people without their asking if she thinks they deserve them. “I believe it is very important that people who are taking a risk in building a company see the benefits of that,” she said.

Entrepreneurs, for their part, have embraced another Silicon Valley trait and learned to try again after failure. Rahoul Mehra, 42, founded Saf Labs, a biotechnology trading company in Mumbai, with his wife, Glennis Matthews Mehra, a 39-year-old neuroscientist. They originally wanted to run all operations out of New York, where they lived. “In doing business with India, we never intended for us to move to India,” he said.

But in 2008, two years into the business, which they had financed on their own, Mr. Mehra realized that deals would not be properly managed unless he was in Mumbai. Dr. Mehra reluctantly followed with their daughter, then 2.

The business managed to turn a profit and attract a private European investor so the company could expand into biotech services. But in 2012, after the Indian government delayed biotech funding for its new five-year plan, Saf Labs’ business was drying up. The Mehras realized they had to move away from the Indian market and focus more on international opportunities.

Now they are negotiating a sale of the company and using their experiences to market advisory services for Indian companies that want to expand overseas or foreign companies looking to enter India.

Other entrepreneurs, too, have begun exploring expansion to other emerging markets: ZipDial has already entered Southeast Asia. Driptech has sold its products in Africa, and Promethean Power is moving into Pakistan, Africa and Latin America.

“I don’t know who said it, but there’s a saying that what you’re going to find in India are little islands of excellence: people â€" despite the country, despite India â€" who are succeeding,” Mr. Mehra said. “If you can connect those dots, you can make a real go of it here.”

Berkshire to Buy Phillips 66 Unit

%PDF-1.4 % 1 0 obj /Producer /CreationDate (D:20131230113839-06'00') /ModDate (D:20131230113839-06'00') /Author /Title >> endobj 4 0 obj > stream x\[oF~7 +"Elݦ$&^vdYVÛ'Μۜ3d 9sËŒp|c6hÒªf4:cYf*O{nIN+×¢t j|w"EW^F5+n55-(nH5p^7t6^?HbZ/-| oݪ=$ekzUcr,>?|vv3\54|J78v= .f8.w0dxJB2g;OO(565įTV+AцU0G$&m`4I᫤/[/Ò¸7S'2®tgߢ ~f^}nL5L>'(x3N}?dh)]V U7xu7V9ukA[=g#l?Jo3ljdOqM#1Ë·|&^ aK#=

Hertz Adopts ‘Poison Pill’ to Thwart Activist Investors

Hertz, one of America’s biggest car rental companies, is battening down the hatches.

The company has adopted a one-year shareholder rights plan, commonly known as a “poison pill,” to thwart an investor from gaining control of the board.

The move, which Hertz attributed to “unusual and substantial activity” in the company’s shares, comes as activist investors are becoming more successful in campaigns to pluck directors of company boards and replace them with their own candidates. Activist investors often buy shares in a company with the intention of shaking things up in the company.

The shareholder rights plan would be triggered by any investor acquiring a 10 percent stake or more of the company’s shares. Hertz’s shares, which have gained 53 percent so far this year, climbed another 3.25 percent to $26.75 in after-hour trading.

The car rental company, based in Park Ridge, N.J., said it had been talking to shareholders, without naming any, and “welcomes their input towards the goal of enhancing shareholder value.” Hertz’s largest listed shareholder is Wellington Management, which holds 9.15 percent of the company’s shares. The hedge fund York Capital Management also has a 2.75 percent stake.

Hertz said the plan would allow management to continue “strategic initiatives,” including the integration of its recent $2.6 billion acquisition of Dollar Thrifty. Hertz acquired Dollar Thrifty last year after a protracted battle with its rival Avis.

Bank of America Merrill Lynch and Barclays are acting as financial advisers to Hertz, and Cravath, Swaine & Moore as legal counsel.

Regulators Have New Cases of Frauds and Abuses to Tackle

Goodbye 2013 frauds; welcome 2014 abuses.

The financial crisis may be five years behind us, but there will never be a shortage in the ways in which the financial markets may be manipulated and abused.

Developments this past year are likely to affect future enforcement actions. For example, the Commodity Futures Trading Commission used the new antifraud rule authorized by the Dodd-Frank Act for the first time against JPMorgan Chase as part of the settlement over the “London whale” case. In that case, the agency accused the firm of using a “manipulative device” in its trading. This gives the agency a powerful tool to police trading in the huge financial futures markets.

The Securities and Exchange Commission unveiled a new policy in selected cases that required an admission of liability, rather than the old “neither admit nor deny” settlement. JPMorgan was the first company subjected to this policy shift by admitting violations related to reporting the London whale trades, coming shortly after a case in which the hedge fund manager Philip A. Falcone acknowledged wrongdoing in how he managed his firm.

This new approach comes after a United States district court judge in Manhattan, Jed S. Rakoff, refused to approve a settlement in 2012 between the S.E.C. and Citigroup because it did not require the bank to acknowledge wrongdoing. That case is now on appeal, but it has been nearly a year since the United States Court of Appeals for the Second Circuit heard the oral arguments. The appeals court’s decision may read much like yesterday’s newspaper now that the S.E.C. is willing to take a harder line in settling some cases.

So expect to see both the C.F.T.C. and the S.E.C. continue to apply their newfound muscle in investigating cases. In addition, there are three areas in which we are likely to see interesting developments in white-collar crime in 2014:

Insider Trading
Saying that insider trading will be a source of headlines in the coming year is like predicting that the New York Yankees will spend a lot of money on players for the baseball season. You know it will happen; the question is, just how much? For insider trading, it is not whether there will be more cases, but who is next.

The United States attorney’s office in Manhattan has kept alive a streak of winning convictions through trials and guilty pleas since 2009 in cases growing out of what it called Operation Perfect Hedge. The target was hedge funds and expert networks that shared confidential corporate information used to get an “edge” on the markets.

By any measure, the crackdown has been a resounding success, with 77 convictions to date. But the last major target of the investigation remains uncharged - Steven A. Cohen, the founder and owner of SAC Capital Advisors. This continues to be a sore point among regulators, and perhaps 2014 may finally be the year that the Justice Department gets some traction.

The S.E.C. filed civil administrative charges against Mr. Cohen, accusing him of failing to supervise a number of SAC employees who engaged in insider trading. The case could result in an order barring him from investing money for outside investors, but that is unlikely to have much impact as the firm is now winding down its operations and shifting to a so-called family office that will manage Mr. Cohen’s prodigious personal wealth.

Building a criminal case looks to be the goal. As DealBook reported, investigators are scrutinizing trades in Weight Watchers, InterMune and Gymboree that may implicate Mr. Cohen. But suspicious trading alone, even in a number of different companies, is probably not enough to win a conviction.

Prosecutors will need someone who dealt directly with Mr. Cohen if they hope to convince a jury that he knowingly traded on inside information, a hurdle that has not been surmounted yet. But the recent jury conviction of Michael S. Steinberg, a former SAC trader, could finally give the government some leverage in getting an SAC trader to “flip” on Mr. Cohen. The big question is whether prosecutors will actually get a credible witness to testify. If that happens, prosecutors may finally bring criminal charges against one of the most prominent and successful hedge fund managers on Wall Street.

Crowdfunding
There will be an increase in so-called crowdfunding as a result of new S.E.C. rules made in response to the Jump-Start Our Business Start-Ups Act, or JOBS Act, adopted in 2012. The new law permits small businesses to appeal directly to the general public to invest in their companies without having to deal with brokers or investment bankers. Instead, the investments are made through online crowdfunding platforms, such as Kickstarter.

This new way for small investors to buy into developing companies is attractive because it is a chance to get a piece of the next great success story. But as the recently released movie “The Wolf of Wall Street” aptly demonstrates, where there is money to be made from investors looking to make the big score, there will be fraud.

That should not come as a surprise, because any investment vehicle can be misused. What may exacerbate the problem is that crowdfunding relies on word of mouth and social networks, and affinity fraud is among the most prevalent ways in which investors are duped. Think about how Bernard L. Madoff attracted so much money from individual investors.

The challenge for regulators, primarily the S.E.C., will be ferreting out fraud from those investments that are just risky. As the Deal Professor aptly noted “you will have better odds at the casino than investing in crowdfunded companies.” So just losing money is not necessarily a telltale sign of fraud because most will come out behind on crowdfunding investments.

The new rules limit the amounts that can be raised to $1 million in a 12-month period, so individual cases of fraud are likely to be small. As crowdfunding proliferates, the issue will be whether the S.E.C. has the resources to investigate a number of potential violations in which differentiating between fraud or excessive risk will be difficult.

Benchmark Manipulation
The manipulation of the London interbank offered rate, or Libor, and other benchmark rates has already netted a number of significant settlements from global banks. In 2012, Barclays paid about $450 million and UBS was fined about $1.5 billion, and more banks settled this past year.

2014 promises more cases, and we are likely to see the first resolutions involving American banks and the primary agencies in the United States involved in the cases, the Justice Department and the C.F.T.C. In the settlements with UBS and the Royal Bank of Scotland, federal prosecutors required that foreign subsidiaries enter guilty pleas to charges of wire fraud.

Whether the same will be demanded from banks like Citigroup and JPMorgan, which recently settled rate-manipulation charges with the European Commission, remains to be seen. The settlements will be a test of how stringently the Justice Department applies the law against American banks that engaged in conduct similar to foreign companies. If prosecutors demand a guilty plea, even from a foreign subsidiary, it will test whether any big banks really are “too big to jail” because of the potential collateral consequences.

A greater threat to global banks will be growing number of investigations of manipulation of other benchmark rates used in financial transactions. As DealBook reported, there is an expanding investigation of misreporting of foreign exchange rates by a group of traders who acquired the nickname “the cartel” from their instant messages.

The United States attorney general, Eric H. Holder Jr., said: “The manipulation we’ve seen so far may just be the tip of the iceberg.” Foreign exchange rates rely on self-reporting by market participants, making them particularly vulnerable to manipulation. Regulators throughout the world can be expected to look at any benchmark rate that can be gamed by traders.

The cases arising from these investigations may be a significant threat to banks because it is not just governments they have to worry about. Market participants cheated out of millions - and perhaps even billions - of dollars through manipulative trading can be expected to sue, and plaintiffs’ lawyers will see this as the next wave of class actions that can generate generous fees.

There are plenty of other potential sources of white-collar cases that can garner attention. Will there be a rogue trader who causes billions of dollars in losses at a firm, or a new vein of insider trading cases built on wiretaps? Who will be the focus of a tax-evasion investigation for using a Swiss bank account to hide assets, or what company will run afoul of the Foreign Corrupt Practices Act for paying bribes to foreign officials?

Cracker Barrel Responds to Activist Investor

Cracker Barrel won’t be sold to the “entrepreneurial mind” of Sardar Biglari anytime soon.

The restaurant chain’s board fired back at Mr. Biglari, the activist investor, on Monday, saying that it plans to continue business as is despite Mr. Biglari’s push to put Cracker Barrel on the block.

Mr. Biglari, whose Biglari Capital Corporation owns nearly 20 percent of Cracker Barrel Old Country Store , chided the company’s management in an open letter last week and pushed for a sale, preferably to him. If the board did not “promptly” announce a sale process, Mr. Biglari said in a separate regulatory filing, he would call a special shareholders’ meeting to vote on such a deal.

“We are disappointed that Mr. Biglari is seeking to call a special meeting to vote on a proposal requesting that the company commence a sale process, particularly in light of his defeat by substantial margins in three consecutive proxy contests,” James W. Bradford, the chairman of Cracker Barrel’s board, said in a statement on Monday. “Cracker Barrel’s board of directors continues to believe that the execution of management’s existing business strategy will create the most value for all shareholders.”

In its letter, the board said it had considered Mr. Biglari’s demands.

A representative for Mr. Biglari could not be immediately reached for comment.

Mr. Biglari, Cracker Barrel’s largest shareholder, whose previous attempts to gain a seat on Cracker Barrel’s board have failed, said it would take an “entrepreneurial mind” to improve the company’s earnings, which he criticized as being too low. Mr. Biglari also criticized the company’s decision to temporarily pull products from A&E’s “Duck Dynasty” television show after its star, Phil Robertson, made inflammatory comments about gay people in a magazine interview.

This isn’t the first time Cracker Barrel has told Mr. Biglari to back off. The restaurant chain, which operates 625 locations in 42 states, has adopted poison pill provisions in the past to prevent Mr. Biglari from taking over.

Bain to Buy Control of Bob’s Discount Furniture

The private equity firm Bain Capital has agreed to buy a majority stake in Bob’s Discount Furniture, the chain of discount stores known for its low-tech commercials featuring its founder, Bob Kaufman.

Bob’s current management team will continue to own a “significant stake” in the business, according to a press release announcing the deal on Monday.

The private equity firm KarpReilly/Apax, which has been a majority owner in Bob’s for the last nine years, will no longer be invested in the company, according to person close to the transaction who did not want to comment publicly because terms of the deal were not disclosed.

Mr. Kaufman, who got his start in furniture by selling waterbeds, opened his first Bob’s Discount Furniture store in Newington, Conn., in 1991. As the chain expanded, so did its commercials. At one point, Mr. Kaufman pitched his famous “Come on Down” line in 500 commercials that aired in the state every week.

One of the largest furniture retailers in the United States, Bob’s now operates 47 stores throughout the Northeast and Mid-Atlantic region.

“We are thrilled to partner with Bain Capital, a firm that has been investing in great retail businesses and consumer brands for decades,” said Ted English, Bob’s chief executive. “Bain Capital brings the experience and resources we need to support our continued expansion to serve more customers in more places, and to provide opportunities for advancement for our people.”

Bain Capital, which has more than $70 billion under management, has invested in other retail chains including Michaels Stores and Burlington Stores. Bain is also an investor in International Market Centers, the producer of annual home furnishing shows in Las Vegas and High Point, N.C.

“We are excited to partner with Ted English and the great management team at Bob’s Discount Furniture to support continued growth in this dynamic business,” Tricia Patrick, a principal at Bain, said in the statement. “We believe the company’s quality furniture at deep value fills an important need in the market today, and along with the authenticity of the Bob’s brand, should drive sustainable growth for years to come.”

Mr. Kaufman began selling waterbeds in the 1980s after they helped him recover from a leg injury suffered in a motorcycle accident. When the waterbed craze began to wane in the early 1990s, Mr. Kaufman and a partner took over a building in Newington where a furniture store had gone into bankruptcy.

Mr. Kaufman, who will retain the title of president, plans to remain as “the face of Bob’s,” according to a spokeswoman for the company.

Bank of America Merrill Lynch and Ropes & Gray advised Bob’s, while Kirkland & Ellis and PricewaterhouseCoopers are advising Bain. Royal Banks of Canada and UBS are providing financing.

Cooper Tire Abandons Merger

The Cooper Tire & Rubber Company announced on Monday that it had ended its merger agreement with Apollo Tyres of India, saying that funding for the deal was no longer available.

The two companies had announced in June a deal for Apollo to acquire Cooper for $35 a share in cash, or $2.5 billion. The deal, which would have created the seventh-largest tire maker in the world, would have been financed entirely by debt.

But the deal foundered because of a dispute over problems at Cooper’s joint venture in China and an arbitrator’s ruling requiring that Cooper renegotiate its contracts with the steelworkers union. Apollo sought to renegotiate the terms of the deal, and Cooper accused the Indian company of acting in bad faith. The dispute landed in the Delaware Chancery Court.

“It is time to move our business forward,” Cooper’s chief executive, Roy Armes, said in a statement. “While the strategic rationale for a business combination with Apollo is compelling, it is clear that the merger agreement both companies signed on June 12 will not be consummated by Apollo and we have been notified that financing for the transaction is no longer available. The right thing for Cooper now is to focus on continuing to build our business.”

“While Cooper believes Apollo has breached the merger agreement, and we will continue to pursue the legal steps necessary to protect the interests of our company and our stockholders, our focus will be squarely on our business and moving it forward,” he added.

Shares of Cooper were down sharply in pre-market trading on Monday.