REUTERS - Apollo Tyres Ltd on Monday reported a fall in second-quarter revenue from its home market, underscoring the need to complete the acquisition of U.S. company Cooper Tire & Rubber Co to diversify overseas.
Apollo had originally agreed to buy Cooper for about $2.5 billion, a deal which would transform the Indian company into the world's seventh-largest tyre maker and cut its dependence on domestic sales. But the transaction has hit several obstacles, including opposition from Cooper's staff.
Apollo reported a profit of 2.19 billion rupees for the quarter ended September 30, up 44 percent from a year earlier, helped by lower raw material costs. It also benefited from a weak rupee, which boosted its European revenues.
Four analysts on average were expecting a net profit of 1.79 billion rupees, according to Thomson Reuters I/B/E/S.
But Apollo, which depends on India for two-thirds of its revenue, reported a 7 percent drop in domestic revenues, compared with a rise in the first quarter.
Apollo has said it is committed to the takeover, but not at the current price of $35 a share, as issues including those involving Cooper's U.S. labour union - United Steel Workers - and its Chinese joint venture made it difficult to close financing of the fully debt-funded deal.
More From This Section
Cooper has also taken Apollo to court in the United States over its failure to close the deal by October 4.
Last Friday, a judge from the Delaware Court of Chancery, which is hearing the case, ruled that Apollo did not breach its obligation to close the deal and was not intentionally dragging its feet in talks with United Steel Workers as an excuse to cut the deal's price.
Judge Sam Glasscock said in a separate letter to the companies' lawyers on Saturday that Cooper had not yet proved it was entitled to receive the initially agreed $35 per share from Apollo to close the deal.
Glasscock said Cooper would have to prove it had satisfied its obligations under the merger agreement, including providing its most recent financial reports which are due to U.S. regulators this week.
Glasscock also said on Friday that if his ruling were not reversed by the state's supreme court and if Cooper did not provide its financial reports, the deal would fall through.
The judge's partial ruling was regarded positively by the market and Apollo's shares rose by as much as 6 percent on Monday ahead of its results in a negative Mumbai market. Cooper's shares, which fell 11 percent on Friday, were up 4 percent on Monday.
"The above ruling is a positive development for Apollo Tyres and lends weight to its argument for a reduction in the offer price for Cooper Tires," Mumbai-based Ambit Capital analyst Ashvin Shetty said. (Reporting by Aradhana Aravindan in Mumbai and Tom Hals in Wilmington, Delaware; Editing by Ryan Woo and Jane Merriman)