Cooper Tire merger a ‘good marriage’

By Dennis Seid/NEMS Daily Journal

Apollo Tyres Ltd.’s acquisition of Cooper Tire & Rubber Co. will help both companies as they merge to form the world’s seventh-largest tire company, officials said.
On Wednesday, India-based Apollo said it was buying Findlay, Ohio-based Cooper Tire in an all-cash transaction valued at $2.2 billion.
In an effort to allay worries, Cooper Tire CEO Roy Armes said Apollo is committed to Cooper’s U.S. operations. In addition to its headquarters in Findlay, Cooper has manufacturing plants in Texarkana, Ark., and in Tupelo.
“I can tell you today that Apollo plans to retain our facilities around the world,” he said.
Cooper’s Tupelo facility, which employs about 1,200 people, is its largest U.S. plant. It opened in 1984 and has produced more than 160 million tires.
Cooper spokeswoman Anne Roman said the merger was a “good marriage,” and matched two companies that complemented each other well. She also reiterated Armes’ stance that Cooper’s U.S. operations need not worry.
“There are no plans to change any factories, no plans for moving production offshore, no plans to move our headquarters,” she said.
Last fall, reports surfaced that Apollo was looking for a controlling stake in Cooper.
In the deal announced Wednesday, Cooper shareholders will receive $35 per share. Based on the company’s 63.3 million outstanding shares the deal is worth about $2.2 billion. The companies valued it at $2.5 billion.
Once the deal is finalized, expected to be in the second half of the year, Cooper Tire will become private and cease trading on the New York Stock Exchange.
Shares of Cooper Tire (NYSE: CTB) rose throughout the day Wednesday and closed at $34.66, jumping $10.10, or 41 percent.
Roman said it was Apollo that approached the larger Cooper, not the other way around.
“We weren’t looking to be acquired,” she said. “We were approached because we were performing so well, and Tupelo is part of that success. This gives us a runway for growth.”
Last month, Cooper reported its first-quarter profit more than doubled from a year earlier, to $56.1 million. For 2012, Cooper posted record sales of $4.2 billion. It recorded a profit of $220.4 million, or $3.49 a share. compared to $253.5 million, or $4.08 a share, in 2011.
The companies have manufacturing overlap in few markets. Apollo has a manufacturing presence in India, South Africa and western Europe, while Cooper has facilities in North America, China and Europe. Roman said the two companies’ product lines “don’t really duplicate.”
Roman said the merger would help fill in the gaps for both companies, allowing them to enter new markets and grow their businesses.
Said Armes, “Apollo and Cooper both focus primarily on the replacement tire business. We also both maintain key original equipment relationships with auto makers. The majority of Apollo’s sales are in commercial truck and passenger car tires. The majority of our sales … are in passenger car and light truck tires and we have an emerging strength in commercial truck tires. So, we’re a good fit in terms of market segments.”
Apollo, founded in 1972 and headquartered in Gurgaon, India, employs about 16,000 people worldwide, with annual revenue of $2.5 billion. Cooper Tire, with $4.2 billion in sales last year, was founded in 1914 and employs about 13,000 worldwide.
In explaining why they accepted an offer from a smaller company, Cooper officials said the merger will create a bigger, stronger company better positioned for long-term success.
“Apollo presented us with a compelling financial offer and the opportunity to add scale and capacity in a very competitive tire industry,” Roman said.
She also said Apollo and Cooper had other traits in common.
“The values of the two organizations are really aligned,” she said. “They talk about their role in their communities and seeking growth, which is aligned with what we’re doing.”
The boards of both companies have approved the deal, which still must meet regulatory and shareholder approval.
Cooper executives are expected to continue leading the company, and Apollo said it plans to honor its labor union contracts. It also said it plans to “generally maintain pay and benefit levels” for its non-union workers.
Apollo said it “plans to maintain the networks and workforces Cooper already has in place and grow existing facilities to meet the combined company’s expanded needs.”
Said Armes, “In the short term, nothing or very little will change. … It will be business as usual. Longer term, Apollo has committed to taking the time necessary to evaluate the combined company in a thoughtful way. And while Apollo is the acquirer, our senior teams are working collaboratively to determine management structures and other aspects of the combined company.”
dennis.seid@journalinc.com