Cooper Tire terminates $2.5 billion sale to India's Apollo

Mon Dec 30, 2013 3:12pm EST
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By Aradhana Aravindan and Rafael Nam

MUMBAI (Reuters) - U.S.-based Cooper Tire & Rubber Co (CTB.N: Quote) said it was terminating a proposed $2.5 billion sale to Apollo Tyres Ltd (APLO.NS: Quote), with both sides threatening legal action over a deal plagued by obstacles from the start.

Cooper Tire said on Monday it was walking away after being informed by the Indian tire maker that financing was no longer available for a takeover that would have been India's second biggest in the United States.

Cooper added it would pursue legal steps to protect the company. Apollo responded by saying it was "disappointed" that Cooper had prematurely ended the agreement, and that it would pursue legal remedies of its own.

Those threats could continue a legal stand-off between the two sides, whose relationship descended into acrimony soon after Apollo agreed to buy Cooper for $35 a share in June, hoping to transform itself into the world's seventh-largest tire maker and cut its dependence on domestic sales.

The dispute is likely to focus on whether 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.

"Cooper does not believe the $50 million termination fee applies. As to the $112.5 million reverse termination fee from Apollo, Cooper is pursuing this and other possible damages," Chief Financial Officer Bradley Hughes said on a conference call.

Despite the threat of legal action, the collapse of the deal may be welcomed by Apollo investors who had expressed concern over the debt-funded acquisition of a company nearly three times its stock market value at that time.

Soon after the offer was made, Apollo sought a price cut of as much as $9 a share, citing Cooper's U.S. labor trouble and disruption at a Chinese joint venture.   Continued...

An employee works inside the warehouse at the Apollo Super Zone showroom in Mumbai October 8, 2013. REUTERS/Danish Siddiqui