Retail

Apollo Tyres to acquire Cooper Tire

Posted on June 12, 2013
Apollo Chairman Onkar S. Kanwa says the acquisition will create an opportunity to serve customers in developed and emerging markets.

Apollo Chairman Onkar S. Kanwa says the acquisition will create an opportunity to serve customers in developed and emerging markets.

Apollo Tyres Ltd. and Cooper Tire & Rubber Co. today announced the execution of a definitive merger agreement under which a wholly-owned subsidiary of Apollo will acquire Cooper in an all-cash transaction valued at approximately $2.5 billion.

Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Cooper stockholders will receive $35 per share in cash. The transaction represents a 40% premium to Cooper’s 30-day volume-weighted average price.

This strategic combination will bring together two companies with highly complementary brands, geographic presence, and technological expertise to create a global leader in tire manufacturing and distribution, according to a joint statement issued by the companies.

There were rumors of a possible purchase in November 2012. At that time, Cooper Chairman, Chief Executive Officer and President Roy Armes said the company does not comment on rumors and speculation (see more here).

Apollo is a company on the move. MTD reported in May 2009 on the completion of its acquisition of Vredestein Banden B.V. from bankrupt Russian tiremaker Amtel-Vredestein N.V. (See also "Vredestein CEO discusses life under Apollo" from November 2009.)

For its first quarter ended March 31, 2013, Cooper reported net income of $56 million on net sales of $862 million. That compares to income of $22 million on sales of $985 million for the same period in 2011. Operating profit rose 102%, from $48 million to a first-quarter record of $97 million. The company's net income-to-sales ratio was 6.5%. Read more here.

See also, "What will Cooper/Apollo merger mean to industry?"

Apollo, founded in 1972, has an international reputation for high performance tires across a portfolio of well-known premium and mid-tier brands, including the flagship Apollo brand and Vredestein.

Cooper, the 11th-largest tire company in the world by revenue, was founded in 1914 and today supplies premium and mid-tier tires worldwide through renowned brands such as Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon.

The combined company will be the seventh-largest tire company in the world and will have a strong presence in high-growth end-markets across four continents. With a combined $6.6 billion in total sales in 2012, the combined company will have a full range of brands and greater ability to satisfy customer needs worldwide.

The combination is expected to deliver value creation benefits of approximately $80 million to $120 million per annum at the EBITDA (earnings before interest, taxes, depreciation and amortization) level. These ongoing benefits are expected to be fully achieved after three years and derived from operating scale, sourcing benefits, technology, product optimization, and manufacturing improvements. The transaction is expected to be immediately accretive to Apollo’s earnings.

“This transformational transaction provides an unprecedented opportunity to serve customers across a host of geographies in both developed and fast-growing emerging markets around the world,” says Apollo Chairman Onkar S. Kanwa.

“Cooper is one of the most respected names in the tire industry, with an extensive distribution network and manufacturing infrastructure, and a particularly robust presence in North America and China. The combined company will be uniquely positioned to address large, established markets, such as the United States and the European Union, as well as the fast-growing markets of India, China, Africa, and Latin America where there is significant potential for further growth. Our combined portfolio of brands and products will be amongst the most comprehensive in the industry.”

Cooper's Armes says, “This is a compelling transaction that is in the best interest of Cooper’s stockholders and offers attractive benefits to our customers and employees. We have watched Apollo’s successful transformation into a major global tire group, and have a great deal of respect for the company and its leadership.

"Together, our two organizations have almost no geographic overlap and significant opportunities for growth. We share a commitment to innovation, quality, and customer service, as well as to the core values of safety, environmental sustainability, the development of our people and giving back to our communities. We look forward to working together to drive continued growth in a dynamic global tire business where increased scale and expanded manufacturing footprint help to ensure long-term success.”

Apollo Vice Chairman and Managing Director Neeraj Kanwar adds, “The combined company’s diversified product offering will serve the passenger car, light and heavy truck, farm, and off-the-road vehicle segments. Our extended global reach will create opportunities to provide our customers and distributors around the world with increased access to the quality tires they have come to expect from each of our respective brands. Together, we will have a significant presence in each of the three largest automotive markets in the world, namely the United States, Europe and China.

“Importantly, both Apollo and Cooper have built strong reputations on the strength of their people, and this transaction will maintain the networks and workforces in each organization’s respective regions, while creating new opportunities in others. We are excited by the possibilities created by our partnership and look forward to welcoming Cooper’s employees to the Apollo family.”

The close of the transaction, assuming timely regulatory approvals and other customary closing conditions, as well as approval by Cooper’s stockholders, is expected to take place within the second half of 2013. Following the close, Cooper will become a privately held company and its common stock will no longer be traded on the New York Stock Exchange.

It is expected that Cooper will continue to be led by members of its current management team and will continue to operate out of its facilities located around the world. Cooper will continue to recognize the labor unions and honor the terms of collective bargaining agreements presently in effect while generally maintaining compensation and benefit levels for non-union employees.

Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. served as financial advisors and investment firm Greater Pacific Capital acted as strategic and financial advisor to Apollo.

Standard Chartered is the sole provider of transaction financing at the Apollo Tyres level and is also the structuring advisor. Morgan Stanley Senior Funding, Inc., Deutsche Bank Securities Inc., Standard Chartered and Goldman Sachs Bank USA are joint lead arrangers providing committed funding to Apollo’s acquisition subsidiary.

Sullivan & Cromwell LLP and Amarchand & Mangaldas & Suresh A Shroff & Co served as legal advisors to Apollo. BofA Merrill Lynch served as financial advisor and Jones Day served as legal advisor to Cooper.

For more information visit www.coopertire.com.

 

Related Topics: Apollo Tyres Ltd., Cooper Tire & Rubber Co., Onkar S. Kanwa, Roy Armes

Comments ( 0 )
More Stories
Brent Windom is returning to Uni-Select, but heading to Canada.
News

Windom is Out at Pep Boys, and Heading to Uni-Select Canada

The man tasked with leading the integration of Pep Boys — Manny, Moe & Jack into investor Carl Icahn’s portfolio of auto parts businesses has left the company. Brent Windom has been appointed president and chief operating officer of Uni-Select Inc.’s Canadian Automotive Group.

News

Tariffs on Imported Steel Affect the Tire Industry

The U.S. Department of Commerce (DOC) is investigating the national security implications of steel imports, and the U.S. Tire Manufacturers Association (USTMA) has testified consumers, as well as the U.S. military, depend on tires and the availability of certain imported steel is critical.

Vice Chairman and Managing Director Neeraj Kanwar (left), Hungary Prime Minister Viktor Orban and Chairman Onkar Kanwar celebrate the opening of the Apollo Tyres Ltd. plant in Budapest.
Article

Apollo Opens Tire Plant in Hungary, Looks for Growth in the U.S.

The opening of Apollo Tyres Ltd.’s new $500 million consumer and commercial tire plant outside of Budapest, Hungary, last month was a huge global event. Said to be the largest investment by an Indian-based company in Hungary, the grand opening drew a visit from Hungary’s Prime Minister Viktor Orban.

Article

Using 'Return on Sales' Measurement to Guide Purchases

Let’s look at two hypothetical tire and service stores, in the same town, a few miles from each other. Both stores do about $1.2 million in sales with about a third of their business in tires, the rest in service. Both see business is up and getting even better. It’s time to hire another salesperson. My advice to one of the owners is, “Go ahead, you need the extra help,” to which he thanks me for my expert opinion. To the other owner, I say, “It will make you lose money,” and he quickly tells me how wrong I am.

Anne Forristall Luke believes as the USTMA better explains the part it plays in consumer safety, consumers will be more likely to ask what part they need to play to keep travel safe.
News

The RMA Is Changing Its Name

The Rubber Manufacturers Association (RMA) is rebranding itself, and its new name is more focused on what its members do — manufacture tires in the United States.

News

ZC Rubber Opens R&D Center

Zhongce Rubber Group Co Ltd. (ZC Rubber) has opened a research and development center in China in cooperation with a state-owned research and development institute.

News

Bauer Built Awards $6,000 in Annual Scholarships

Since 1994 Bauer Built Inc. has recognized the children and grandchildren of its employees through the G. F. “Sam” and Ethel V. Bauer/Bauer Built Inc. Scholarship program. Four high school seniors have earned the prize in 2017.

Be the First to Know

Get the latest news and most popular articles from MTD delivered straight to your inbox. Stay on top of the tire industry and don't miss a thing!