A Delaware court rejected an appeal by Cooper Tire & Rubber Co. (CTB) to force a $2.5 billion takeover by Apollo Tyres. Apollo wanted to cut its $35-a-share offer by as much as $9, citing the labor issues.
The move puts the deal’s fate back in the hands of a lower state court. If Cooper doesn’t get a ruling in its favor by Dec. 31, Apollo can terminate the contract.
Cooper is still trying to resolve a lockout at its Chinese factory and remains unable to deliver updated financial statements to Apollo, which says it needs the information to sell bonds to pay for the deal. As an alternative to a settlement or paying what it originally agreed, Apollo could hand over a $112.5 million “reverse breakup fee” to walk away.
Meanwhile, CTB shares plunge in NYSE:
Not sure how this will play out but the biggest question is why are these issues coming to light 6 months after the deal was announced? Isn’t it the job of M&A advisers to dig up these things? Morgan Stanley and Deutsche Bank served as financial advisors to Apollo. If these issues were known before hand, as CTB alleges, then what was the Apollo board thinking? Isn’t this also a failure on part of the board to supervise its CEO?
I would avoid Apollo Tyres purely based on the colossal supervisory failure of both the management and the board. What is to stop these jokers from doing this all over again?
Sources:
Apollo Rises After Court Rejects Cooper Appeal on Deal
Court Dismisses Cooper Tire Appeal of Ruling on Stalled Takeover
Apollo Tyres to Acquire Cooper Tire & Rubber Company
Apollo Tyres: Buyer’s Remorse
Apollo Tyres: Buyer’s Remorse, Part Deux