NEW DELHI -- India's Apollo Tyres has asked a U.S. court to declare that conditions needed to close a $2.5 billion bid for Ohio-based Cooper Tire have not been satisfied, but added that it still believes the proposed deal is "compelling."
The proposed merger announced in June between Apollo and the much larger Cooper Tire & Rubber Co. (IW 500/225) would create the seventh-largest tire manufacturer in the world with a presence in markets in four continents.
But the takeover plan has been fraught by labor problems involving Cooper's U.S. operations and at Cooper's Chinese unit.
Apollo, based in the New Delhi satellite city of Gurgaon, said in the court filing that "the conditions precedent to the closing of the merger have not been satisfied," according to a statement the company released today.
But the Indian company reaffirmed that it believes a merger with Cooper is "strategically compelling" and said it "continues to work diligently to address the various post-announcement impediments preventing Cooper from consummating the merger."
Apollo alleged that Cooper has failed to meet its contractual obligations under the merger agreement, partly due to its lack of control over its Chinese subsidiary, Cooper Chengshan Tire.
Workers at Cooper's majority-owned joint venture in China have been on strike against the deal for the past three months while the Chengshan Group has filed a lawsuit seeking to end its partnership with the U.S. firm.
The Chinese workers are reportedly worried about cultural differences with the future Indian owners and about Apollo's ability to finance the acquisition.
Request for Price Reduction Rebuffed
Last week, Cooper rejected Apollo's demand for a price reduction over problems related to the U.S. firm's operations at home and in China.
In September, an arbitrator banned Apollo from including two of Cooper Tire's unionized plants in the deal amid demands by workers that the Indian company recognize the United Steelworkers as their collective bargaining representatives.
Apollo fears concessions to the United Steelworkers union (USW) could hike labor costs after the takeover.
Cooper has said the situations with the USW and the joint venture partner and union in China "are a direct result of the merger agreement, and are risks Apollo assumed under the merger agreement."
In the initial deal, Apollo agreed to buy Cooper for $35 a share in an all-cash transaction that was to be completed by the end of this year.
Shareholders in the Indian company have fretted that the acquisition of the much larger Cooper Tire -- to be financed entirely through debt -- will strain its balance sheet.
The initial offer for the U.S. company represented a 40% premium to Cooper's share price on the last trading day before the deal was announced.
The takeover bid is India's biggest ever for a U.S.-based company, according to London-based data provider Dealogic, and it prompted concern among analysts due to Cooper's slowing projected revenues.
Apollo produces Apollo and Vredestein brands. Cooper's brands include Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon.
Copyright Agence France-Presse, 2013
