February 6, 2014 3:07 am

India’s Apollo to shift focus after failed Cooper Tire deal

Apollo Tyres will turn its back on China and the US after its audacious attempt to buy a far larger rival fell through last year, and instead invest its cash in Europe and southeast Asia.

Apollo attempted to pull off the biggest takeover of a US company by an Indian one with its $2.5bn bid for Cooper Tire, but the deal ended in acrimony and mud-slinging after Cooper’s Chinese subsidiary refused to allow the transaction to close.

“It has really given me, as an investor, an eye-opener. And now, I do not want to get in to China,” Neeraj Kanwar, managing director, told the Financial Times. “I have the rest of the world to deal with. There are many more places that can deliver growth.”

The Indian tyremaker will instead plough up to $500m into two new factories to be built within the next four years, eyeing a plant in eastern Europe and one in southeast Asia.

“This went sour. Fine. I’m not going to sit on my back and wait for something to happen,” Mr Kanwar said. “For some time we had stopped organic [growth] because of the Cooper transaction. But we are back into looking at greenfield sites.”

The Cooper deal, which would have created the world’s seventh-largest tyre company by revenue, was derailed just days after it was announced when workers at Cooper’s Chinese joint venture partner, Chengshan Group, reacted to the news by seizing control of the business, which provides nearly 25 per cent of Cooper’s revenue.

Apollo turns its back on China

The Apollo Tyres Ltd. logo is displayed on an Acelere Maxx tire at the company's Apollo Super Zone retail outlet in Mumbai, India, on Tuesday, June 18, 2013. Apollo Tyres, India's largest tiremaker, last week agreed to acquire Cooper Tire & Rubber Co. for about $2.5 billion. The deal would be the biggest takeover by an Indian company in the U.S

“I am not going into China,” says Neeraj Kanwar, managing director, just over a month on from the official end of his bid. “We are a very open and transparent company . . . I don’t think China is set up for us right now . . . 

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In spite of attempts by both Apollo and Cooper to assure the Chinese workers that their business would not be affected by Indian ownership, the problem led Apollo to try to renegotiate the value of the deal, which collapsed at the end of the year.

Apollo, which relies on India for about two-thirds of its revenue, has production plants in the Netherlands and South Africa.

The company will use a new European plant, possibly in Hungary, to focus on increasing its presence on the continent and in former Soviet countries. The southeast Asian plant will supply to countries in the region and in the Middle East.

A final decision on the plants’ construction will be taken in the next few months, Mr Kanwar said.

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