Cooper Tire & Rubber Co.’s (CTB - Analyst Report) merger with Apollo Tyres Ltd. has received an astounding 96% support of the voting shareholders of the company. Voting rights were exercised for around 78% of the outstanding common shares, of which 48 million or 74% were in favor of the deal.
The merger is expected to close by the end of 2013. The resulting company will be the seventh-largest tire company in the world with presence in various lucrative markets such as North America, India, China, Latin America and Africa. Currently, Cooper Tire is the 11th largest tire company in the world, on the basis of revenues.
The acquisition of Cooper Tire by a wholly owned subsidiary of Apollo Tyres was announced in Jun 2013. The transaction was approved by the board of both companies before the deal was made public. Thereafter, the deal received clearance from both U.S. and foreign regulatory bodies.
The purchase consideration for the all-cash transaction amounted to $2.5 billion. Apollo Tyres will pay $35 per share to the shareholders of Cooper Tire, which includes a 40% premium on the 30-day volume-weighted average price of Cooper Tire at the time of the announcement of the deal.
The acquisition will result in benefits of operating scale, sourcing benefits, technology, product optimization, and manufacturing improvements, which are expected to boost earnings before interest, taxes, depreciation and amortization (EBITDA) by $80-120 million per annum after 3 years. However, the earnings of Apollo Tyres are expected to increase post the acquisition.
However, the deal is facing opposition from Cooper Tire’s Chinese joint venture. The Chinese workers feel that the deal will jeopardize their employment and are seeking dissolution of the joint venture.
Cooper Tire currently carries a Zacks Rank #5 (Strong Sell). Some stocks that are worth considering in the same industry include Goodyear Tire & Rubber Company (GT - Analyst Report) , American Axle & Manufacturing Holdings Inc. (AXL - Analyst Report) and Fuel Systems Solutions, Inc. . All these companies carry a Zacks Rank #1 (Strong Buy).