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.
On 26 July, the Hart-Scott-Rodino (HSR) review period for Apollo Tyres’ pending acquisition of Cooper Tire & Rubber expired with no action taken by the Federal Trade Commission or the Department of Justice in the US. In a statement issued on 2 August, Cooper Tire explained that the expiration of the HSR review period satisfies one of the conditions necessary for the acquisition transaction to close. Cooper and Apollo now expect that, subject to the remaining customary closing conditions, the transaction will be completed before the end of the year.
Cooper Tire & Rubber reports it has now manufactured more than two million passenger car tyres using silica masterbatch (SMB) technology developed together with Mexico’s Industrias Negromex S.A. de C.V (INSA). The tyre maker says the technology has delivered a number of benefits, including improved mixing productivity and flexibility, the elimination of volatile organic compound (VOC) emissions) which are associated with the standard silanisation process of mixing silica) and improved silica dispersion in tyre tread formulations. Cooper says better dispersion means superior traction, wear and rolling resistance performance.
On 25 July, United States Senator Sherrod Brown, who represents the state of Ohio, met with Apollo Tyres chairman Onkar Kanwar and vice chairman and managing director Neeraj Kanwar to urge them to protect jobs in his – and Cooper Tire & Rubber’s – home state.
Financial analysts will need to form their own opinions when Cooper Tire & Rubber releases its second quarter 2013 financial results on 8 August. The US tyre maker has announced that in light of its pending acquisition – described as a “merger” in a Cooper press release – by India’s Apollo Tyres, the company will not host a financial community conference call. In the absence of this otherwise regular event a press release will be published on the tyre maker’s website, and Cooper says further information will be available in Form 10-Q of the company’s quarterly report.
The launch of Avon Tyres’ latest sports touring motorcycle tyre aimed at the hypersport market, the Storm 3D X-M, took place near the brand’s Melksham, Wiltshire manufacturing base at Castle Combe in May. The Cooper-owned brand says it has since been reaping the plaudits for the new tyre, tested out by two-wheel specialist journalists on the fast and bumpy circuit.
Cooper Tire Europe describes its seasonal offering as “a focused list of improved winter tyres which provides a better offering for both trade and consumer as soon as the temperature drops”. The range encompasses fitments for all types of cars and 4x4s.
Following news of industrial opposition to the on-going Apollo/Cooper takeover and even strikes at Cooper Chengshan in China, company representatives have broadly confirmed that there has been disquiet. However, while the local news coverage suggests this has been the case for nearly a month, Apollo representatives did not confirm this detail and report that the deal is very much on-track and indeed entering the end-game of what they referred to as a “compelling strategic transaction”.
Chippenham constituency MP Duncan Hames has welcomed the news of Cooper Tire & Rubber’s receipt of £1 million in funding from the Department of Business, Skills and Innovation’s Regional Growth Fund. The funding will be backed by private investment amounting to £4.3 million and will allow Cooper Tire to build a combined heat and power plant at the factory and install solar panels on the roof – measures aimed at improving energy efficiency and making the site more environmentally friendly.
Workers at Cooper Chengshan, a joint-venture between Cooper Tire & Rubber Company (USA) and Chengshan Group (China), are reportedly on a strike in protest against Apollo’s proposed acquisition of Cooper. If correct the reports could throw up a fairly significant spanner in the works as the trade union which represents workers at what is deemed to be “the largest, most profitable and fastest-growing factory of the eight” plants that come as part of the Cooper deal, Cooper Chengshan, have expressed their opposition to the deal.
Swiss Finance Corporation has purchased 6.78 million Apollo Tyres shares on the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange of India) for Rs 482.19 million (£5.3 million). This transaction gives the trading institution a 1.34 per cent stake in Apollo. The shares were purchased at an average price of Rs 71. In a separate deal, Swiss Finance then sold 200,000 Apollo Tyres shares on the NSE for a total of Rs 14.8 million, or Rs 74 per share.
News of Morgan Stanley Asia (Singapore) Pte’s investment in Apollo Tyres has prompted a slight rise in the Indian tyre maker’s share price. Morgan Stanley purchased 2.7 million Apollo shares – a 0.5 per cent stake in the company – for Rs 63.37 a share. After this news was released, shares rose briefly to Rs 64.80; still more than 31 per cent down on their trading price before Apollo announced it would acquire Cooper Tire & Rubber.
Shareholders ‘voted with their feet’ following the announcement that Apollo Tyres would acquire Cooper Tire & Rubber for US$2.5 billion, causing share prices to plummet from Rs 92.60 on 12 June – the day the deal was announced – to a low of Rs 54.60 (£0.61) nine days later. Now, several institutional investors are said to be speaking with the Indian tyre maker in the hope it will reconsider the transaction.
Financial analysts have maintained a “neutral” rating for shares in Cooper Tire & Rubber Company. The report published 4 July by Zack’s Equity Research explained the general reasoning, which follows Apollo Tyre’s agreement to buy the company for US$2.6 billion on 12 June: “We are pleased with its improved 2013-first quarter results and focus on reducing costs together with increased efficiency in each of the plants. However, we are concerned about the increasingly competitive landscape.”
Is this the opening shot in the anticipated round of consolidation within the tyre industry? Or is it merely an expression of courage, or cockiness, with Indian tyre manufacturer Apollo in the role of a predator, seeking to grasp the much-larger rival Cooper as prey and in doing so exposing itself to the risk that the US$2.5 billion price will land it in debt above its head? Is attack the best form of defence or has the Indian company overreached with this ambitious and financially-edgy expansion plan?
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