The seriously underfunded pension scheme of US tyre giant Cooper’s UK subsidiary — primarily a legacy of its Avon Rubber purchase in 1997 — could help to scupper the takeover of Cooper by India’s Apollo Tyres.
This possibility has emerged during court filings in the US State of Delaware (where Cooper is technically domiciled for advantageous corporate taxation planning purposes), as the company tries to force Apollo to complete its acquisition at the originally agreed price of £1.55bn. Apollo is attempting to negotiate a discount on that figure because Cooper’s share price has plunged following an acrimonious strike at its big Chinese joint venture in opposition to the proposed takeover.
The pension scheme of Cooper Avon — based in Melksham, Wiltshire, and still a major manufacturer of motorcycle tyres — had a shortfall of £76.5m at the end of last year, representing approximately a third of its benefit liabilities. And now the scheme’s trustee is reportedly threatening to ask the UK Pensions Regulator to block the takeover. This is because the debt Apollo intends to raise to finance most of the acquisition will be loaded onto Cooper’s books, thereby pushing the UK pension scheme much further down any list of unsecured creditors in the event of insolvency.