India's Apollo Tyres Ltd. said Wednesday it would acquire Cooper Tire & Rubber Co. in a $2.5 billion deal that would give the buyer access to the U.S. market and catapult the combination into the upper tier of global tiremakers.
Terms of the deal call for Gurgaon-based Apollo to pay $35 per share in cash for Cooper, a premium of 43% to the target's Tuesday close. Apollo, which last month said it would sell its operations in South Africa to Sumitomo Rubber Industries Ltd. for $60 million, said it would fund the deal with new borrowings.
The companies said the deal would create a manufacturer with $6.6 billion in annual sales and rank as the world's seventh-largest tire seller. Findlay, Ohio-based Cooper, which ranks as the world's 11th-largest tire company by revenue, was founded in 1914 and does business via brands including Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon.
Apollo, in business since 1972, has substantial market share in India and Europe but has been seeking to expand in areas such as North America that have been growing faster.
"This transformational transaction provides an unprecedented opportunity to serve customers across a host of geographies in both developed and fast-growing emerging markets around the world," Apollo chairman Onkar S. Kanwar said in a statement. "The combined company will be uniquely positioned to address large, established markets, such as the United States and the European Union, as well as the fast-growing markets of India, China, Africa and Latin America where there is significant potential for further growth."
The companies expect the deal to close before year's end. Apollo said it expects Cooper to continue to be run by members of current management and to honor the terms of collective bargaining agreements in place.
Cooper chairman and CEO Roy Armes in a statement said the deal is in the best interest of shareholders and "offers attractive benefits to our customers and employees," noting that the companies "have almost no geographic overlap and significant opportunities for growth."
Apollo expects to generate synergies of at least $80 million annually at the Ebitda level within three years via better scale, product optimization and manufacturing improvements.
Morgan Stanley and Deutsche Bank Securities Inc.'s Jim Ratigan, Brian Willer, Edwin Roland, Sid Chhabria and Matt Bilge are serving as financial advisers to Apollo, with Greater Pacific Capital LLP acting as a strategic and financial adviser to the buyer. Standard Chartered Bank plc is the sole provider of transaction financing, with Morgan Stanley Senior Funding Inc., Deutsche Bank AG, Standard Chartered and Goldman Sachs Bank USA as joint lead arrangers providing committed funding.
Sullivan & Cromwell LLP's Scott D. Miller, Jay Clayton, Adam S. MacLeod, Shannon M. Haley, Anush Yegyazarian, Douglas S. Sunshine, Stephen M. Fisher, Presley L. Warner, Samiul E. Khan, Claudia Lai, Bruce T. Gavin, Juan Rodriguez and Patrick Gorman and Amarchand & Mangaldas & Suresh A. Shroff & Co. served as legal advisers to Apollo. Cooper was advised by Bank of America Merrill Lynch's Ravi Sinha, John Pratt and Chris Shoemaker and a Jones Day team comprised of Lyle Ganske, Peter Izanec, James Dougherty, Brett Barragate, Manan "Mike" Shah, Dan Hagen and Stan Weiner.
Real estate investment manager Clarion Partners LLC hired Michelle Levy as chief operating officer of the client capital management group, based in New York. For other updates launch today's Movers & shakers slideshow.
Tribune Publishing Co. shares rallied on Monday, despite the newspaper group denying Rupert Murdoch′s claim that it was headed toward a sale. More video