Cooper Tires Jumps 40% On $2.5 Billion Sale

Findlay, Ohio based Cooper Tires CTB Wednesday morning announced it had entered a merger agreement with Indian based Apollo Tyres. Under the arrangement, Cooper Tires shareholders would receive $35 per share, representing about a 42.5 percent over Tuesday's closing price.

Sale of Company

Under the terms of the agreement, Cooper Tires will be sold for all cash to a wholly-owned subsidiary of Apollo for $2.5 billion or $35 per share. The transaction represents a 40% premium to Cooper's 30-day volume-weighted average price.

In the press release, the companies said, "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."

"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."

New Profile

The combined company is expected to have $6.6 billion in sales and the deal will deliver a boost to EBITDA of $80-120 million due to synergies. The transaction is expected to be immediately accretive to Apollo's earnings.

Management Weighs In

Onkar S. Kanwar, Chairman of Apollo, stated, “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. 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.”

Roy Armes, Cooper's Chairman, Chief Executive Officer and President, said, “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.”

Neeraj Kanwar, Vice Chairman and Managing Director of Apollo, said, “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.”

He added, “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.”

Market Impact

Cooper Tires shares rose 40 percent pre-market to $34.40, just below the takeover price of $35.00. Cooper shares will delist following the completion of the deal.