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Cooper Tire Breakup Caps Bad Year for Emerging Market Deals

Stocks in this article: CTB AIG

NEW YORK (TheStreet) -- Talk about getting it wrong.

When U.S. tire manufacturer Cooper Tire & Rubber (CTB) unveiled a deal to be acquired by Apollo Tyre of India for $2.5 billion, TheStreet analyzed the transaction and said it could indicate an increasingly global automotive industry as emerging market consumers enter the car market.

About half a year later the merger is off. The failed tie-up between the two tire-manufacturers might serve to cool the appetite of U.S. firms selling themselves to emerging market buyers, and vice versa.

Already, it's been a messy year for M&A between U.S. and emerging market companies.

In May, AIG (AIG) was jolted when it found out an investor group led by New China Trust wasn't able to make a 10% down payment on a $5.28 billion deal to buy a majority stake in the insurer's aviation finance unit, International Lease Finance Corporation. The deal eventually fell apart, and AIG spent much of the second half of 2013 scrambling for a new buyer for ILFC.

Earlier in December, AerCap Holdings (AER) of the Netherlands agreed to buy ILFC from AIG for $5.4 billion, in a deal that could help AIG institute a meaningful dividend in 2014.

Still, there are few things that reflect worse on a management team than a failed merger.

Smithfield Foods almost became another cautionary tale of U.S.-to-emerging market corporate activity. Shortly after announcing a $7.1 billion deal to be acquired by Shuanghui International Holdings of China, U.S. lawmakers balked at the tie-up citing national security concerns. It is worth noting Smithfield Foods is best known as a maker of pork and beef products and that Shaunghui is among the largest pork processors in China.

Starboard Value, an activist hedge fund, also balked at the deal and instead proposed a breakup of the foods giant. 

In the end, a Committee on Foreign Investment in the U.S. review approved Shaunghui's acquisition of Smithfield, as did the company's shareholders. Unionized employee contracts were one area where the Smithfield deal with Shuanghui succeeded and the Cooper/Apollo deal failed.

While Shuanghui was able to offer Smithfield's unionized workers status quo, Cooper's deal with Apollo Tyre was marred with labor disputes in China and the U.S.

In May, the United Food and Commercial Workers International Union, one of the biggest union representatives of Smithfield workers, backed the company's plan to be acquired by Shaunghui, possible muting negative publicity over the transaction. "The UFCW is pleased that workers in our communities can benefit from the growth and expansion of the U.S. pork industry," the union said.

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