Massachusetts drivers may be interested in knowing that a $2.2 billion tire buyout has been canceled after a messy legal interchange between Cooper Tire & Rubber Company and the Indian Apollo Tyres. The deal, which was announced about six months ago, has been cancelled by Cooper, which claims that financing is unavailable. Cooper also is adamant that Apollo Tyres breached terms of the agreement; although, a court investigation found no evidence of a breach on Apollo’s part.
Negotiations with a labor union representing Cooper employees became strained during the deal. Apollo brought up issues with labor in China and potential lesser profits and attempted to secure a better price. However, Cooper alleges that Apollo Tyres never came to them with a new offer complete with financing. Cooper claimed that the absence of guaranteed funding made the venture an “unreasonable risk” for the company.
The business litigation is set to continue as the companies are clashing on whether or not termination fees are due. Cooper argues that it does not owe Apollo the $50 million termination fee set out in the initial agreement and that Apollo actually owes their company a reverse termination fee. Cooper alleges that Apollo did not make enough of an effort to reach an agreement with the labor union, though Apollo has stated that efforts were “exhaustive.” The failed deal has impacted Cooper shares considerably — the announcement of the buyout caused a spike in share pricing, but shares have steadily fallen since then.
Like many business negotiations, the failed tire deal between Cooper and Apollo is multilayered and contains several sticking points. Because of the large amounts of money involved, however, the legal entanglements and courtroom battles following the unraveling of the case have been, and continue to be, manifold.
Source: ABC News, “Cooper Tire Ends Buyout Agreement With Apollo”, Tom Murphy, December 30, 2013