This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Cooper Gains Upper Hand in Delaware Case

NEW YORK (The Deal) -- The Delaware trial over the $2.5 billion acquisition of Cooper Tire & Rubber Co. (CTB - Get Report) by Apollo Tyres of India seems to be leaning in Cooper's favor.

The court battle over whether either side of the tire manufacturing deal failed to make best efforts to complete the transaction ends this week.

Cooper shares remained at a discount of roughly $9 to their $35 value in the merger, but rose about $2.20, or 9%, Thursday.

Increasingly, it looks like Apollo will be found to have dragged its feet over coming to a resolution regarding the United Steelworkers' labor issues, a risk arbitrageur said.

Debt commitments for the troubled merger were set to expire at the end of the year. Steelworkers' labor agreements, negotiated last year by Cooper, became an issue after an arbitration dispute in August determined that the labor contracts required renegotiation because of the change of control with the Apollo deal.

Labor issues at a Cooper joint venture in China also have plagued the transaction and been a key matter in the Delaware dispute regarding Cooper's obligation under the merger agreement to provide financing information to Apollo and its banks.

The resolution of the trial is not clear-cut, arbs said. It is obvious there is not going to be a $35 per share deal - the terms of the merger agreement - but a settlement is the reasonable solution, arbs said.

The situation looks better for Cooper than when the trial began, but there are a lot of crosscurrents, so it remains a tough call as far as trading the deal, an arb said. Both parties seem to have behaved badly regarding delivering their best efforts under the merger contract, the arb said. It makes sense that they would reach some settlement because the outcome is too uncertain, he added.

The problem is that Apollo could be determined to be in breach of the merger agreement, but unable to secure the financing for the deal, an arb said. Under that scenario, it makes sense to Cooper to settle, he said.

The outcome could be a revised deal with a price cut of $3 to $3.50 per share, some arbs speculate. But it is not clear that the parties still want to complete a merger.

Cooper last week presented a possible solution for the steelworkers' labor issues, but that agreement expires next week and appears as much a proffering before the court as a resolution to the complex issues that must be overcome to resurrect and complete a revised transaction.

Written by Scott Stuart

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CTB $34.28 -0.75%
AAPL $93.66 -0.09%
FB $118.58 0.85%
GOOG $698.30 0.76%
TSLA $241.82 0.44%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.39 +16.09 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs