Apollo files counterclaim against Cooper's lawsuit

Says its response to complaint filed by Cooper detailed the US firm's failure to provide information under the merger agreement

Delhi-based Apollo Tyres has filed a counterclaim to Cooper Tire & Rubber's lawsuit seeking a judgment that the conditions precedent to the closing of the $2.5-billion merger haven't been satisfied by the American tyre maker.

In a statement on Tuesday, Apollo Tyres said the company's response to the complaint filed by Cooper detailed the US firm's failure to provide information under the merger agreement. This was partly due to its lack of control over its Chinese subsidiary, Cooper Chengshan Tire, as well as Cooper's breach of several representations, warranties and covenants in the merger agreement, it said.

Apollo filed its reply and the counterclaim on Monday.

Responding to a complaint filed by Cooper Tire with the Delaware Court of Chancery on October 4, Apollo has denied allegations it sought to delay an agreement with United Steelworkers, which represents Cooper employees at the Ohio and Arkansas facilities.

Apollo said it had worked diligently to reach a settlement with United Steelworkers. The negotiations were aimed at enabling Cooper overcome a United Steelworkers injunction prohibiting Cooper from sealing the merger.

"Apollo also asserted affirmative defences, including that conditions precedent to closing had not been satisfied because the marketing period for the financing, central to Cooper's claims in its complaint, had never commenced and that Cooper had failed to meet its contractual obligations under the merger agreement," the company said in its statement.

Last week, Apollo Tyres had said it was looking to renegotiate the value of the $2.5-billion deal to acquire Cooper Tire, due to persisting labour issues at the latter's Chinese and American facilities. Cooper had rejected suggestions that it had agreed to a price reduction.

According to Cooper, Apollo wanted a price renegotiation "far greater than the $2.5 reduction it had earlier proposed and, at one point, referencing $8 or $9 a share". In an all-cash deal announced in June, Apollo had agreed to buy Cooper at $35 a share; the deal was to be completed by the end of this year. Apollo had paid a 43 per cent premium to Cooper shares' 30-day weighted average price as of June.

Cooper said, "The situations with United Steelworkers and the joint venture partner and union in China are a direct result of the merger agreement, and are risks Apollo assumed under the merger agreement."

Last week, the American company received a favourable decision from the Delaware Chancery Court, which granted Cooper's request for an expedited hearing of its October 4 complaint.

According to information available, if the deal is terminated as a result of any contractual breach by Apollo Tyres, the American company could pursue financial damages much beyond the $112.5-million breakup fee in original agreement made in June this year. On the other hand, Cooper Tire would have to pay Apollo at least $50 million if it fails to close the deal.