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Apollo Tyres did not breach its obligation to close its $2.5 billion buyout of Cooper Tire & Rubber Co last month as originally agreed, a Delaware judge ruled on Friday.
Judge Sam Glasscock rejected Cooper's allegations that Apollo was intentionally dragging its feet in talks with the United Steel Workers as an excuse to cut the deal's price.
Cooper had wanted the judge to order Apollo to accept a labour agreement that Cooper had negotiated and then order the buyout deal to close on its original terms. When the two companies announced the deal in June, they anticipated it would close by October 4.
"We are pleased that the Delaware court has found that Apollo is not in breach of its merger agreement with Cooper Tire," said Apollo in a statement. "Apollo continues to believe in the merits of the combination and is committed to finding a sensible way forward."
In a statement later in the day, Cooper said it was "disappointed with the decision of the Delaware Chancery Court that Apollo did not breach its obligation to expeditiously reach an agreement with the United Steel Workers as per the terms of the merger agreement." Cooper is assessing its options with respect to this decision and awaits the court's ruling on other open matters in this case, it added.
Glasscock did not find that Apollo was suffering from buyer's remorse, as Cooper alleged. He also said he found no evidence the Indian company had negotiated in bad faith with Cooper's unions.
Glasscock ruled following closing arguments on Friday in his Georgetown, Delaware, courtroom, according to court documents. A three-day trial in the dispute ended Thursday.
Cooper shares fell sharply as the judge's ruling reached investors. The shares ended down 11.45 percent at $23.82 on the New York Stock Exchange on Friday. Apollo had agreed to buy Cooper for $35 per share.
After Cooper sued, Apollo made its own allegations and said it was under no obligation to close, in part because Cooper had not provided updated financial information.
As part of his ruling, Glasscock also cleared the way for Cooper to appeal to Delaware's Supreme Court. The state's high court has a reputation for hearing cases quickly. Last month, it reversed a ruling in less than three weeks in an $8.2 billion deal involving Vivendi and Activision Blizzard Inc.
The Cooper-Apollo trial centred around problems in reaching a new labour contract at two Cooper plants, and on Cooper's renegade joint venture partner in China that has locked out managers from the US company.
Hanging in the balance is a deal that would transform Apollo from a company focused on its domestic market into the seventh-biggest tire maker in the world. Cooper shareholders stand to lose a 40 percent premium for their stock if the deal collapses.
Apollo has said it wants a lower price that reflects the increased cost of a new labor deal and the unanticipated risks associated with the Chinese lockout.
The case is Cooper Tire & Rubber Co v. Apollo (Mauritius) Holdings Pvt Ltd, Delaware Court of Chancery, No. 8980.
