Update of Apollo Tyres

Apollo Tyres will not have to pay a $112.5 million break-up fee to US-based Cooper Tire over a $2.5-billion deal that came unstuck last year.

In a judgment last week, a US court had ruled in favour of the Onkar Kanwar-led company in a dispute with Cooper Tire for breaching the merger agreement.

In December last year, Cooper Tire had terminated the merger agreement with Apollo Tyres, just over six months after it had clinched a deal that was touted to create the world’s seventh-largest tyre maker.

The US tyre maker had said it would pursue legal steps against Apollo for a breach of the agreement by failing to close the deal.

Cooper Tire’s decision had capped an acrimonious dispute between the partners that broke out after the US tyre maker’s partner in China, the Chengshan Group company, filed in court for the dissolution of the joint venture.

Cooper holds a 65 per cent stake in Cooper Chengshan (Shandong) Tire Company, the Chinese venture, which was one of the most attractive features of the agreement as it would have given Apollo a beachhead in the world’s fastest-growing market for tyres.

On November 12 last year, Cooper had said that it was unable to provide information about the Chinese operation in its results for the quarter ended September 30 — giving Apollo the opportunity to seize on that disclosure to charge it with a breach of its obligations.

The dispute escalated after a US court said Apollo would have to re-negotiate labour agreements with workers at two US plants before the merger could go through.

However, last week, Judge Sam Glasscock III of the Delaware Chancery Court said Cooper Tires failed to comply with its contractual obligations.

Welcoming the judgment, Apollo Tyres said: “We are pleased by the decision. This ruling vindicates our consistent stand that even as Apollo Tyres made exhaustive efforts to complete the deal, Cooper failed to comply with its contractual obligations because it was unable to control its largest subsidiary,” Apollo said in a statement.

Shares of Apollo Tyres gained today. On the Bombay Stock Exchange, the scrip rose over 5 per cent, or Rs 11.20, to end at Rs 229.85.

The share hit a new 52-week high of Rs 231 in intra-day trade yesterday.