Cooper Judge Rules for Apollo Over Union Talks in BuyoutPhil Milford and Sophia Pearson
Apollo Tyres Ltd. won a preliminary victory in its court battle over Cooper Tire & Rubber Co.’s demand that it complete a $2.5 billion buyout when a Delaware judge ruled the Indian company fulfilled its obligations to negotiate with a U.S. labor union.
Apollo had cited disputes at Cooper’s United Steelworkers union as a reason for asking for a $2.50-a-share cut to the $35-a-share offer. Cooper accused Apollo of intentionally delaying the transaction. Cooper fell almost 17 percent before recovering to an 11 percent decline at $23.82 at the close yesterday in New York.
“There’s no evidence that Apollo acted in bad faith” in trying to negotiate a contract with the United Steelworkers union, Delaware Chancery Court Judge Sam Glasscock III said yesterday after closing arguments in Georgetown, Delaware.
Glasscock said he may rule by Nov. 13 on whether to force Apollo to complete the buyout. That’s the date after which Apollo’s financing may be in jeopardy. The decision could be based partly on whether Cooper disclosed the extent of its internal disputes, including the possibility of managers at its Chinese unit trying to scuttle the deal.
Cooper is appealing the decision. Glasscock gave the company approval to appeal to the state’s Supreme Court.
Anne Roman, a spokeswoman for Cooper, said in an e-mail that the company is disappointed with the decision.
“Cooper is assessing its options with respect to this decision and awaits the Court’s ruling on other open matters in this case,” Roman said.
Talks to complete the largest acquisition by an Indian company in North America soured in October amid opposition from U.S. and Chinese workers. Apollo, based in Gurgaon, India, sought to cut its price, citing the labor issues. Findlay, Ohio-based Cooper, the fourth-largest U.S. tire maker, sued Oct. 4, the day Apollo’s purchase was originally scheduled to close, alleging buyer’s remorse was intentionally delaying the transaction’s completion.
“We are pleased that the Delaware Court has found that Apollo is not in breach of its merger agreement with Cooper Tire,” Samantha Verdile, a spokeswoman for Apollo, said in an e-mailed statement. “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.”
Glasscock made his ruling at the conclusion of a three-day trial on the eve of which Cooper said it had reached its own deal with the Steelworkers and demanded Apollo’s approval. Apollo argued that Cooper hasn’t lived up to the contract and told the judge the last-minute union agreement was “illusory.”
Neeraj Kanwar, Apollo’s vice chairman, testified during the trial that he was concerned that Cooper had lost control of the Chinese joint venture and had no access to its financial data. That subsidiary, Chengshan Group Co., which operates Cooper’s biggest plant, stopped making Cooper tires on July 13 in protest of the Apollo deal.
In its complaint, Cooper said Apollo agreed to use its “reasonable best efforts” to complete the transaction or pay a $112.5 million fee to walk away from the deal. Apollo should be compelled to sign the agreement reached with the U.S. union on Oct. 30 and then be required to consummate the merger, Cooper said.
Apollo accused Cooper of taking extraordinary steps to induce the agreement with unions at its plants in Findlay and Texarkana, Arkansas. The agreement expires on Nov. 18.
The case is Cooper Tire & Rubber Co. v. Apollo Holdings Pvt Ltd., CA8980, Delaware Chancery Court (Wilmington).