Cooper Tire terminates proposed $2.5 billion sale to Apollo Tyres

Apollo Tyres Ltd. | Tyres & Allied | Automobiles | BSE: 500877 | NSE: APOLLOTYRE

31 Dec 2013 Evaluate

U.S.-based Cooper Tire & Rubber Co has terminated a proposed $2.5 billion sale to Apollo Tyres with both sides swearing to take legal action over a deal beset by obstacles from the start. Cooper Tire decided to call off the deal after being informed by the Indian tyre maker that financing was no longer available for a takeover that could have been India's second biggest in the United States. On the other hand, Apollo Tyres, was disappointed with Cooper for premature closure of the agreement and has decided to pursue legal remedies of its own.

These threats would ensure continuation of a legal stand-off between the two parties, whose relationship descended into hostility soon after Apollo agreed to buy Cooper for $35 a share in June, hoping to transform itself into world's seventh-largest tyre maker and cut its dependence on domestic sales. With this, it remains to be seen if either company is liable to pay a break-up fee. Under the deal terms, Apollo would have been liable to pay a $112.5 million fee, while Cooper could be held responsible for break-up fee of $50 million.

However, despite the company showing the disappointment with premature closure of the deal, its shareholders, which right from the start of the deal had raised concerns over the debt-funded acquisition of a company nearly three times its stock market value at that time, would welcome this news.