No ‘buyer’s remorse’ – court rules Apollo not in breach of agreement

A US court has ruled that Apollo Tyres hasn’t intentionally delayed its acquisition of Cooper Tire & Rubber or breached the terms of its acquisition agreement. The preliminary ruling delivered by Judge Sam Glasscock III on 8 November opines that while Apollo has demonstrated effort in its negotiations, plaintiff Cooper cannot demonstrate it has satisfied all the conditions of the $2.5 billion deal or met all obligations in regards to closing the deal on its original terms.

A number of matters still remain open, and Judge Glasscock will make a final ruling at a later date. Amongst the issues to be resolved are the signing of a new labour agreement with the United Steelworkers (USW) union and Cooper’s delivery of up to date financial information to Apollo’s creditors – this second point must be fulfilled by 14 November if Cooper is to avoid breaching the merger agreement.

Apollo Tyres said in a statement that it is “pleased” the Delaware Chancery Court found it not in breach of its merger agreement with Cooper Tire. “Furthermore, the Court found that Apollo has used ‘reasonable best efforts’ to negotiate with the USW and that, contrary to Cooper’s claims, ‘nothing in Apollo’s conduct indicates buyer’s remorse.’ Apollo continues to believe in the merits of the combination and is committed to finding a sensible way forward.”

A statement issued by Cooper Tire & Rubber shares that the tyre maker “is disappointed with the decision of the Delaware Chancery Court that Apollo did not breach its obligation to expeditiously reach an agreement with the United Steelworkers per the terms of the merger agreement.” Cooper says it now is “assessing its options with respect to this decision and awaits the Court’s ruling on other open matters in this case.”

During the court hearing’s three days, shares in Apollo Tyres declined from Rs 76.05 a share to Rs 70.1 a share; as of 8:00am GMT the price had rebounded to R3 75.3 a share.