Apollo offered $200M to end China dispute

Staff Writer
Columbus CEO

By DANIEL KELLEY

FOR THE COURIER

But "Chairman Che" rejected the offer, saying he wanted up to twice as much money, Apollo's Sunam Sarkar said.

Sarkar said Apollo continues to negotiate with Che in an effort it calls "Project Charlie."

Che has been a looming, mysterious figure in three days of hearings this week in the Delaware Court of Chancery, where a Cooper lawsuit is trying to force Apollo to complete its $2.5 billion buyout of Cooper.

Cooper has a 65 percent stake in the huge Chinese tire plant, called Cooper Chengshan (Shandong) Tire Co. The plant does not list its executives on its website.

The plant, a joint venture since January 2006, can produce up to 15 million tires a year and, according to court testimony this week, represents about 25 percent of Cooper's revenue.

Its 5,000 workers struck the plant for about three weeks after Apollo announced its planned buyout of Cooper on June 12. The strike was organized by Che, according to testimony this week. Since then, plant workers have refused to let Cooper supervisors inside and have not provided financial information on its performance. They have also stopped making Cooper-brand tires.

Apollo and Cooper executives discussed Che's potential reaction to the buyout early in their negotiations, according to testimony this week.

Cooper CEO Roy Armes testified Tuesday that he told Apollo officials Che would go with a sale, or try to buy out Cooper's stake in the plant, or try to block the larger deal.

Neeraj Kanwar, the vice chairman of Apollo, disputed Armes' account, testifying he was never told that Che could block the deal. Kanwar testified he believed Che could, instead, try to buy all of Cooper.

Sarkar said Apollo was warned that Che could "react negatively" to Apollo's bid.

In a meeting with Kanwar in China after the merger was announced, Che said, "My father is changing to a stepfather, but what am I getting?" according to court testimony.

Che also has gone to Chinese courts to dissolve the joint venture with Cooper. Lawyers for Cooper said Thursday that they are hoping to move that action to Hong Kong because they believe Che is politically connected to courts in the plant's region.

According to court testimony, internal Apollo documents indicate it does not believe the China situation is significant enough to trigger a clause in the merger agreement that could allow Apollo to walk away from the buyout of Cooper without paying a $112.5 million penalty.

The Delaware judge, Vice Chancellor Sam Glasscock III, has ordered oral arguments this afternoon to "address the significance of Nov. 14."

Cooper's quarterly financial reports are due to be filed with the Securities and Exchange Commission on that date.

If Cooper cannot release quarterly financial statements because it cannot get performance data from the Chinese plant, Apollo could point to that date as a breach of the buyout agreement, experts said.

Meanwhile, both sides continue to argue about whether Apollo has taken all reasonable steps to reach a deal with the United Steelworkers union, which represents Cooper workers in Findlay and Texarkana, Ark.

An arbitrator ruled that Apollo must have a labor agreement with the union before the buyout can be completed. Cooper announced Friday that it has reached an agreement with the USW.

Gaurav Kumar, chief of corporate strategy for Apollo, testified that this deal with the USW would cost Apollo up to $150 million.

Apollo originally offered to pay Cooper stockholders a 40 percent premium, or $35 a share. Cooper's stock closed Thursday at $26.90 per share, up nearly 10 percent.

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