India's Apollo Tyres to buy Cooper Tire for $2.5 billion
GURGAON, India -- India's Apollo Tyres Ltd. is buying Cooper Tire & Rubber Co. in an all-cash deal valued at $2.5 billion, or about a 40-percent premium over the 30-day average price of Cooper's stock.
The combination of the Nos. 16 and 11 tire makers worldwide will create an entity with roughly $6.6 billion in annual sales -- good for a No. 7 world ranking -- and manufacturing at a dozen plants in eight countries: China, England, India, Mexico, the Netherlands, Serbia, South Africa and the United States.
In a joint statement on Wednesday, the companies called the acquisition a "strategic combination" of two companies with "highly complementary brands, geographic presence, and technological expertise."
Cooper CEO Roy Armes, in the statement, called the deal a "compelling transaction that is in the best interest of Cooper's stockholders" that 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," Armes said.
"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 Tyres Chairman Onkar S. Kanwar said the 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," he said.
"The combined company will be uniquely positioned to address large, established markets, such as the U.S. 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 and Apollo said they expect to reap pre-tax "value-creation benefits" of about 80 million to $120 million per year. These operating profit benefits are expected to be fully achieved after three years and will be derived from operating scale, sourcing benefits, technology, product optimization, and manufacturing improvements.
The transaction is expected to be immediately build up Apollo's earnings.
Under the terms of the agreement, which was approved unanimously by the boards of directors of both companies, Cooper stockholders will receive $35 per share in cash.
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, the companies said.
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 its labor unions and honor the terms of collective bargaining agreements presently in effect while generally maintaining compensation and benefit levels for non-union employees, the company said.
The combined entity controls a wide array of brands -- Apollo, Cooper, Vredestein, Mastercraft, Chengshin, Roadmaster, Starfire and Avon -- in the passenger, light and heavy truck, farm and OTR vehicle segments and has a sold presence in the world's three key markets, North America, Europe and China, Kanwar said.
"Importantly, both Apollo and Cooper have built strong reputations on the strength of their people," he said, "and this transaction will maintain the networks and workforces in each organization's respective regions, while creating new opportunities in others."