Apollo Tyres stock plummets 20% on Rs.14,500 Cr acquisition of Cooper Tire

The Apollo Tyres stock plummeted 20.87 per cent to Rs 72.80 in the late morning trade on Thursday on the BSE after the company announced that it will acquire the US-based Cooper Tire & Rubber Company in an all-cash transaction of around Rs 14,500 crore ($2.5 billion). A consortium of four banks — Morgan Stanley, Deutsche Bank, Goldman Sachs and Standard Chartered — will raise $2.5 billion of new debt to fund what is one of the largest overseas acquisitions by an Indian company.

Under the terms of the deal, which has been unanimously approved by the boards of directors of both companies, Cooper stockholders will receive $35.00 per share in cash. Apollo is paying Cooper shareholders a 43 per cent premium over yesterday’s closing price on the New York Stock Exchange.

According to Neeraj Kanwar, Vice-Chairman and Managing Director, Apollo Tyres, this deal will propel Apollo Tyres from 16th to 7th position in the global tyre manufacturing rankings, and get deeper market access in the US, Europe and China. Cooper Tire is ranked 11th globally with revenues of around $4 billion. As part of the deal, Apollo Tyres will take over 14,000 employees and the operations of Cooper’s eight plants across the world, taking Apollo’s headcount to 30,000.

After the merger goes through, Apollo will have 14 plants worldwide, and will more than double its capacity to 3,500 tonnes per day from 1,500 tonnes per day now. The deal is expected to be concluded in the second half of this year, after regulatory approvals as well as getting approval from Cooper’s stockholders.

Apollo was founded in 1972 and is reputed for high performance tires across a range of well-known premium and mid-tier brands, including the flagship Apollo brand and Vredestein. Cooper was founded in 1914 and today supplies premium and mid-tier tires worldwide through renowned brands such as Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon.