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October 6, 2013 6:28 pm
India’s Apollo Tyres wants a reduction in the price it is to pay to acquire Cooper Tire, saying it faces “significant and unanticipated costs” relating to labour relations issues and accusing the US company of “misrepresenting” the extent of its control over a joint venture in China.
The Indian company said Cooper had “acknowledged to Apollo that some price reduction is warranted.”
But Cooper denied this and said there were no grounds for such a reduction. The disputes with the United Steel Workers’ union and in the Chinese joint venture were a result of the deal, it added, and consequently among the risks that Apollo had assumed. Last week, it filed a lawsuit to force Apollo to conclude the deal. “Cooper looks forward to closing this compelling transaction,” it said on Sunday.
Apollo announced plans in June to take over Cooper in a $35-a-share all-cash deal valuing the shares at a total $2.5bn. If the deal goes through, it will be the biggest-ever takeover of a US company by an Indian one, and will create the world’s seventh-biggest tyremaker by sales.
However, the transaction has run into severe problems. Workers at a joint venture that Cooper controls in China’s Shandong province have gone on strike in protest over it and barred Cooper’s managers from the factory.
In the US, the USW has won a ruling from an arbitrator barring Cooper from selling factories in Findlay, Ohio and Texarkana, Texas to Apollo until the union reaches a satisfactory deal with Apollo over job security and other issues.
“On top of the USW issue, Cooper has breached material representations and covenants, including with respect to its majority-owned China subsidiary, due to the fact that Cooper has no control over the subsidiary or access to its books and records,” Apollo said. “Cooper has misrepresented its management and control of this asset to Apollo and to its own shareholders.”
Apollo’s trenchant criticism followed Cooper’s announcement on Friday that it was taking legal action to force Apollo to proceed quickly with the transaction.
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