DENNIS SEID: Apollo-Cooper brings more opportunities – and worries

By Dennis Seid/NEMS Daily Journal

“Apollo” isn’t a name heard much these days. In mythology, Apollo is the god of music, healing and prophesy. In the 1960s, the Apollo space program was NASA’s successful attempt to land men on the moon. In the 1970s, Apollo Creed was Rocky Balboa’s nemesis in “Rocky.”
Today, Apollo is top of mind for many in the tire industry after last week’s announcement that the India-based Apollo Tyres Ltd. would merge with a larger rival, Ohio-based Cooper Tire & Rubber.
Apollo, the 16th-largest tire manufacturer in the world, is acquiring Cooper, the world’s 11th-largest, in a deal worth $2.2 billion. Combined, they would become the seventh-largest tire company.
That would put them in front of Yokohama Rubber Co., the Japanese-based company that recently announced its plans to build a plant in West Point.
Of course, Apollo and Cooper officials said all the right things. How the merger would create a bigger, better, stronger company. How the deal would open new markets. How their cultures and values meshed and how they were good for each other.
They used buzzwords like “scale” and “optimization.”
Apollo Chairman Onkar S. Kanwar called it a “transformational transaction.”
But for Cooper workers in Tupelo, Texarkana, Ark., Findlay, Ohio, and elsewhere, their chief concern is what happens to their jobs and their pay.
Cooper, the only other U.S. tire maker other than Goodyear, soon will be foreign-owned.
Apollo said it plans to honor union contracts at Cooper and “generally maintain” pay and benefits for non-union workers.
But that leaves some room for interpretation, doesn’t it?
Cooper officials said Apollo has assured them that they’ll keep the U.S. factories open and keep Cooper’s Findlay headquarters.
But mergers and acquisitions also mean looking at the overall cost structure to see where efficiencies can be gained. Officials said the merger should bring savings of $80 million $120 million a year in about three years.
While Cooper shares jumped after the announcement, Apollo investors weren’t as impressed. Their biggest concern is that Apollo is taking on $2.5 billion in debt to make the deal.
Neeraj Kanwar, Apollo’s vice chairman, said, “this transaction will maintain the networks and workforces in each organization’s respective regions, while creating new opportunities in others.”
Naturally, both companies will put their best spin on the deal. It’s the nature of any M&A transaction.
I’m not trying to douse all the happy talk regarding the merger and the advantages the companies claim, but the reality is that people always will wonder when their company changes hands.
As Cooper CEO Roy Armes said himself, “Who knows what can change in five or 10 years? That’s the nature of our business.”
Contact Dennis Seid at (662) 678-1578 or dennis.seid@journalinc.com.