(Corrects to show figures represent a suggested price reduction in ninth paragraph of story published yesterday.)
Cooper Tire & Rubber Co. (CTB:US) asked a Delaware judge to fast-track its dispute over a proposed $2.5 billion takeover by Apollo Tyres Ltd. (APTY) and to hold a trial by Nov. 7. Cooper shares fell the most in more than two years.
Cooper, based in Findlay, Ohio, said June 12 that it would be bought by Gurgaon, India-based Apollo for $35 a share, sparking four lawsuits by investors seeking more money. Cooper has now sued Apollo to force the transaction after the Indian firm said the price was too high. The deal was scheduled to close on Oct. 4.
Cooper said that while Apollo is contractually obliged to use its “reasonable best efforts” to complete the takeover, it’s “currently using its best efforts not to,” according to filings made public in Delaware Chancery Court today.
Apollo may have to pay Cooper a $112.5 million “reverse breakup fee” if it backs out of the deal, according to a court filing.
Regarding a labor contract central to the dispute, Cooper accused Apollo of dragging its feet in negotiating an agreement with United Steelworkers unions. The delay is intended as leverage to force Cooper to agree to a lower price, the company said in a filing.
“These things usually settle,” Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said in an interview, calling the lawsuit “an invitation for negotiations.”
Cooper said in the complaint that under the merger contract one circumstance that would allow Apollo to walk away is a “material adverse effect,” something that alters the value of the target business.
Apollo had agreed such effects would exclude disputes with Cooper’s labor unions or partners, including a Cooper joint venture with China’s Chengshan Group Co. that Apollo knew about, according to the complaint.
At one point last week, Apollo representatives suggested a price reduction of “$8 or $9” a share, according to court papers.
“Cooper has acknowledged to Apollo that some price reduction is warranted,” Apollo said in a statement today. “The issue now is by how much. We continue to have committed financing from four major international banks and are ready to launch our financing, subject to reaching agreement.”
In its own statement today, Cooper said it “rejected Apollo’s efforts to obtain a reduction in share price,” and “does not agree that any such reduction is warranted.”
Cooper fell more than 13 percent to $25.65 at 2:32 p.m. in New York trading (CTB:US), the biggest intraday decline since August 2011.
The case is Cooper Tire v. Apollo, CA8980, Delaware Chancery Court (Wilmington).
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