Cooper Chairman and CEO Roy Armes told a Delaware court judge that the tiremaker’s Chinese joint venture partner was considering making a run at Cooper, but was shut out when Cooper accepted the $35 per share offer from Apollo Tyre.
In his opening day testimony yesterday in Cooper’s suit against Apollo, Armes also said the Indian tiremaker should have understood that the resulting lock-out at Cooper Chengshan Tire Co. was a risk and should have baked that into its acquisition price offer.
The non-jury trial before judge Sam Glasscock III in Delaware Chancery Court continues today and Thursday, and it is expected the judge will rule shortly thereafter. At stake is whether Apollo will be forced to close on its original deal, struck with Cooper on June 12, or if the terms of the acquisition can be modified.
Apollo can still exercise its right to walk away, but would have to pay $112 million as part of the terms of the sale contract.
Apollo claims that the unexpected lock-out was the doing of the Chinese partner, and that Cooper has lost management control of the plant, of which it owns a 65% share. Key financial information and documents pertaining to the joint venture have not been delivered to it for review and verification, Apollo claims.
In September, an arbitrator ruled in the favor of the USW in its complaint against Cooper that the successorship clause in its master contract was in effect and that any sale of the tiremaker required the new owner to work out a new labor deal with the union.
Apollo claimed in court filings that it attempted to do so, but both Cooper and the union made it difficult to get a new contract worked out. Meanwhile, Cooper struck new succesorship deals with the USW for its Findlay, Ohio, and Texarkana, Ark., plants last week, a move Apollo attorneys called a “last minute stunt.”
According to an Economic Times of India report, “Armes said he worked with advisors from Apollo to work out the problems in China and thought things were going well until an Aug. 27 email from Neeraj Kanwar, Apollo’s vice chairman. The message raised the possibility the Chinese problems could threaten the deal’s financing.
"‘As I recall, I was at first surprised and confused,’ said Armes, who said just three days earlier Kanwar’s tone was friendly. ‘It seemed somewhat contradictory.’"
Armes said he was “offended” when Kanwar later came back to him just days before the scheduled Sept. 30 vote on the sale by Cooper shareholders to “say a labor agreement would cost up to $125 million,” the Econominc Times reported. “The Indian company wanted to cut the deal price by as much as $2 per share.
“‘I was offended,’ said Armes. As he saw it, Apollo was asking Armes’s shareholders to pay a very steep price that was allegedly being demanded by unions at the company’s plants. Cooper has taken the position that the risk of labor problems should have been part of the price Apollo negotiated.”
