Ownership of the British-based Avon tyre brand won’t be heading eastwards in the foreseeable future, after its US parent Cooper Tire unilaterally aborted a planned takeover by India’s Apollo Tyres on 30 December.
The £1.5bn deal, which became the subject of rancorous legal disputes and a rebellious challenge from Cooper’s Chinese joint venture after its announcement last June, was due to be completed on a year-end deadline. Claiming that there is no prospect of Apollo managing to fulfil its merger terms as that deadline expired, Cooper has now terminated the agreement and walked away.
Three main obstacles to Apollo’s ambitions emerged in the intervening six months. In the US, the United Steelworkers trade union representing Cooper’s American workforce won a court ruling that effectively gave it a veto on the takeover unless concerns over its members’ job security and pensions entitlement were satisfactorily dealt with. The UK pensions authority also joined in with legal sabre-rattling over the protection of retirement benefits at the Cooper-Avon subsidiary in Melksham, Wiltshire.
But the biggest problem came when Che Hongzhi, chairman of Cooper’s Chinese JV partner Chengshan Group, aggressively opposed the prospect of their joint business falling into Indian hands. His reaction was to seize control of Cooper Chengshan Tire, which was responsible for about a quarter of Cooper’s global revenue, evicting US managers and turning off the cashflow taps.
As a result, Cooper’s share price fell by more than 30 per cent below the Apollo takeover offer. Apollo then began its own legal moves designed to force Cooper into renegotiating the agreed offer price downwards to a more realistic level. Â