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November 9, 2013 12:57 am
India’s Apollo Tyres won a significant victory in its legal tussle with Cooper Tire and Rubber, which it agreed to take over in June, when a judge ruled that it had not reneged on key commitments in its merger agreement.
Sam Glasscock, vice-chancellor of the Delaware Court of Chancery, delivered a partial ruling in the case, in which he had heard evidence over three days this week in Wilmington.
Judge Glasscock will give his full ruling later this month.
Cooper had argued that Apollo was experiencing buyer’s remorse over the $2.5bn deal and was seeking to use problems over a key union contract to delay the transaction so that it would collapse. There was no dispute in the evidence that Apollo was seeking to reduce the price from the original deal from $35 a share to $32.50.
Cooper was seeking an order forcing Apollo to proceed more quickly with the transaction, which has also encountered severe problems in China, where a joint venture partner has seized control of one of Cooper’s most important plants.
Judge Glasscock said, according to a person present in court, that there was no evidence Apollo had acted in bad faith by excluding Cooper from negotiations over a new deal with the United Steel Workers’ union – a key plank of Cooper’s case.
A press release from Apollo after the judgment quoted the judge as saying that Apollo had used “reasonable best efforts” to negotiate with the union. “Nothing in Apollo’s conduct indicates buyer’s remorse,” he said.
Apollo said it was pleased the court had not found it was in breach of the merger agreement.
“Apollo continues to believe in the merits of the combination and is committed to finding a sensible way forward,” it said.
Cooper said it was “disappointed” with the judgment.
“Cooper is assessing its options with respect to this decision and awaits the Court’s ruling on other open matters in this case,” it said.
It remains unclear how the two parties will proceed now. Roy Armes, Cooper’s chief executive, told the court during the week that he had been “offended” when Neeraj Kanwar, Apollo’s managing director, demanded the deal price be reduced over the problems encountered. Apollo insisted it was reasonable the price be reduced because of the extra costs that the largely unanticipated problems would impose.
The court heard substantial evidence about the difficulty that Apollo would face arranging financing for the deal because of Cooper’s current inability to produce third-quarter results, thanks to the disruption in China.
The court heard that China’s Chengshan Group, owner of 35 per cent of the Chinese joint venture, was demanding $400m for its stake, while Apollo was offering it between $150m and $200m.
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