Yesterday the court case between Apollo Tyres & Cooper Tire & Rubber began in the US. The case is scheduled to run until tomorrow, and on the first day Cooper chairman, chief executive officer and president Roy Armes shared why relations with the partner in its Cooper Chengshan joint venture operation turned sour once the Apollo acquisition deal became known.
A Delaware Chancery Court judge has turned down Apollo Tyres’ bid to have Cooper Tire & Rubber’s lawsuit against it dismissed. Judge Sam Glasscock III stated during a telephone hearing that both parties should “prepare for trial” if they can’t settle their differences alone.
Both Cooper Tire & Rubber and Apollo Tyres state they want the merger/acquisition deal to close, yet each blames the other for delaying this. First Cooper alleged its suitor wasn’t settling certain issues; now Apollo says Cooper has failed to address everything required for the agreement to be finalised.
Within the next few hours, Cooper Tire & Rubber shareholders will cast their votes in favour or against Apollo Tyres’ bid to acquire the US tyre maker for US$2.5 billion.
Following the rescheduling of the Cooper Chengshan court hearing to an undetermined date, the Chengshan Group sought to have the case moved from China to Hong Kong. However, Bloomberg reports that the Weihai Intermediate People’s Court has decided not to allow this change of venue.
As well as needing to sort out issues at the Cooper Chengshan plant, Cooper Tire & Rubber and Apollo Tyres now face an additional barrier to acquisition. Last Friday an arbitrator ruled that Cooper cannot sell its Findlay and Texarkana plants in the US until Apollo secures new collective bargaining agreements with the United Steelworkers union and the 2,500 or so unionised workers at the two factories. This agreement is separate from the existing contract the union has with Cooper Tire.
In the latest installment in the on-going Apollo/Cooper merger saga, a Chinese court has postponed a hearing on a case brought against the combination by Chinese manufacturing business Cooper Chengshan.
Resistance to the acquisition of Cooper Tire and Rubber by Apollo Tyres continues unabated, with workers at the Cooper Chengshan joint venture factory in China's Shandong province locking out their US managers in protest against the deal.
Workers say that the takeover will put their jobs at risk and, according to Yue Chunxue, director of the labour union at the plant, foreign managers could face the risk of "bodily injuries". He added: "unless the deal is cancelled, we will continue to boycott it until the very end. A three-month strike ended on August 17th but the union is continuing to boycott work on Cooper-branded products.
Shares in Cooper Tire & Rubber fell 3.3 per cent to US$31.50 on Monday 26 August, putting the stock down 6.1 per cent in total this month. According to the Wall Street Journal, this marks a two-month low and comes off the back of investor fears that the decision India’s central banks to review large deals by Indian companies may affect the transaction. Indeed one report emanating from India suggests that Apollo Tyres’ big for Cooper Tire is about to get reviewed in particular.
A spokesperson from Cooper Tire & Rubber’s head office in the US has confirmed to Tyres & Accessories that the Cooper Chengshan joint venture plant, which has now resumed production following strike action, is not manufacturing any Cooper-branded products at the present time; the tyres currently produced at the Rongcheng facility are exclusively other-branded products.
It appears the strike at the Cooper Chengshan factory in China is over, and the 5,000 workers are back at their jobs and producing tyres. Details of how the strike was resolved are not yet known.
Apollo Tyres Ltd has reported first quarter 2013-2014 financials including a 19 per cent rise in net profits to 1.66 billion rupees (22.8 million euros; US$29.7 million). The announcement followed the approval of a large dividend pay-out of 50 per cent per share (0.50 per equity share), for the year ended 31 March 2013.
Cooper Tire & Rubber’s second quarter 2013 results – most likely the last it will post before its incorporation into Apollo Tyres – showed a year-on-year drop in net sales, operating profit and net income. Net sales amounted to US$884 million, a decrease of $174 million compared with the same period a year ago, and operating profit for the second quarter was $69 million, $26 million lower year-on-year and 7.8 per cent of net sales. Net income was $35 million, or $0.55 per share, down from $52 million, or $0.82 per share, for the same period last year.
The strike at the Cooper Chengshan plant in China’s Shandong Province has now been underway for more than two weeks, and although Cooper Tire and Apollo Tyres state this industrial action will have no effect on the planned takeover, union officials at the plant are equally adamant it shouldn’t take place.
Representatives of Cooper Tire’s Findlay, Ohio corporate headquarters have confirmed that the company is facing strike action at its Rongcheng, China plant. In answer to Tyres & Accessories questions, a company spokesperson confirmed that as a result the dispute the factory is “in communication with customers…regarding product supply”. No further details of what this means in practice have been released. However T&A has seen once such customer communication, which suggests the strike, which has reportedly been going on for around a month, is resulting in the delay of export shipments.
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