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Return volley: Apollo files a countersuit against Cooper
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October 17, 2013

Return volley: Apollo files a countersuit against Cooper

by Bob Ulrich - Also by this author

It's not often a company will send you a copy of a complaint filed against it -- and address all the allegations. But that's what Apollo Tyres Ltd. did on Oct. 15. And a countersuit was included.

By now, we are all aware of the lawsuit against Apollo by Cooper Tire & Rubber Co. filed on behalf of Cooper's shareholders. Cooper accepted Apollo's June 2013 offer of $35 a share to buy the company and wants to move the deal along. Apollo has taken exception to the way Cooper is going about that.

For all that background information, check out the links below.

In preparation for the hearing, scheduled in the Court of Chancery of the State of Delaware for November, Apollo has addressed every complaint and allegation against it, in the process expanding Cooper's "verified complaint" to nearly 100 pages! Thirty-nine of those pages are the counterclaim.

The hearing is set in November, by the way, because the court ruled in favor of Cooper's request for an expedited hearing.

In an overview of Apollo's response to the verified complaint, it:

* denied the allegations made by Cooper regarding the course of its negotiations with the United Steelworkers (USW);

* confirmed that it has worked diligently to reach a settlement with the United Steelworkers to enable Cooper to overcome the USW's injunction prohibiting Cooper from consummating the merger.

Apollo also asserted affirmative defenses, 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 has failed to meet its contractual obligations under the merger agreement."

And for good measure, Apollo filed a counterclaim seeking "a declaratory judgment that the conditions precedent to the closing of the merger have not been satisfied." Apollo, in its responses to the various complaints, "details Cooper’s failures to provide information required to be provided under the merger agreement due in part to its lack of control of its Chinese subsidiary, Cooper Chengshan Tire, as well as Cooper’s breach of several representations, warranties and covenants in the merger agreement."

That's a lot of legalese. In a nutshell, Apollo and Cooper still have details to iron out. But there are a lot of interesting tidbits in this document that I thought I would pass along. At the very least, they showsyou the state of mind of each of the parties.

1. Cooper says it entered into the merger agreement "only after considering possible transactions with other potential acquirers."

2. Cooper says that "almost immediately after the merger agreement was announced, Apollo showed signs of buyer's remorse." Apollo not only denies this, but also "reaffirms that it believes that a merger with Cooper is strategically compelling," and is working toward it.

3. Cooper claims that following adverse reactions from the market, Apollo "began looking for other ways to avoid or at least delay the transaction."

4. Cooper says that Apollo made a "thinly-veiled threat to hold up closing unless Cooper were to agree to a price reduction." Apollo denies this.

5. Cooper claims that Apollo asked for a price renegotiation, with a reductiion of $8 or $9 per share being referenced. Apollo denies this.

6. Apollo claims in the countersuit that Cooper did not provide it with "required information," and that it is not in compliance with the merger agreement, "in part because its representations and warranties are not true." It also holds Cooper responsible for its lack of control over its Cooper Chengshan (Shandong) Tire Co. Ltd. subidisary, which has led to a stoppage of Cooper tire production.

7. Apollo is asking the court to declare that the conditions "precedent to closing" under two key sections of the merger agreement have not been satisfied. Should the court agree with Apollo, the company is asking the court to not only award it costs and reasonable attoney's fees, but also grant "such other relief that the court deems just and proper."

I have a feeling the parties will not be cordial to each other when they meet in court in November.

For more information on the proposed merger, check out these links:

"Apollo looks forward to court hearing w/Cooper."

"Cooper gets its way in court against Apollo."

"War of words: Apollo and Cooper respond to each other's claims."

"Cooper and Apollo disagree on details."

"Cooper sues Apollo for dragging its feet."

Related Topics: Acquisitions, China, Lawsuit, Stock price, USW

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Author: Bob Ulrich | Posted @ Thursday, October 17, 2013 6:38 AM

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