ANATOMY OF A FAILED MERGER

“The merger of Apollo and Cooper will create a perfect global tyre company1” – Neeraj
Kanwar, MD Apollo Tyres

“We are just looking at how we can collaborate as two companies, and take advantage of the
strengths we both offer2” – Roy Armes, CEO and President, Cooper Tires

“I’ve been a good son and the father is good. Now the father is divorcing me and the stepfather
is coming in3” – Che Hongzhi, Chairman, Chengshan Group

APOLLO TYRES – THE BIDDER

Apollo Tyres Ltd. (ATL) was incorporated 28th September, 1972 as a Public Limited Company4.
The Company was promoted by Bharat Steel Tubes, Ltd. Raunaq International Pvt. Ltd., Raunaq
& Co. Pvt. Ltd., Raunaq Singh, Mathew T. Marattukalam and Jacob Thomas. The Company was
in the business of manufacturing automobile tyres and tubes, camel back/retreading materials
and rubber conveyor belts. It came out with an IPO in 1975.

The company grew steadily over the years and became the largest exporter of tyres from India in
1995. In 2002, Mr Onkar S Kanwar became the Chairman of the Board of Directors in the
company and Neeraj Kanwar became the Chief Operating Officer of the company.

Apollo under the leadership of Neeraj, steadily started building inroads in the international
market. It acquired Dunlop, South Africa in 2006. It established a manufacturing plant in
Hungary in 2008 to mainly cater to the European clients It acquired 100% shareholding control
of Vredestein Banden B.V., Netherlands in 2009 which helped Apollo in widening its product
base.

By 2010, Neeraj Kanwar had become the Vice chairman of the board and the Managing Director
at Apollo tyres and was looking at growing the company through acquisition and merger route.
The company wanted to make inroads into the American market and started looking at strategic
partners for the same. Cooper Tire and Rubber co. was one of the most promising options on
their horizon. Onkar Kanwar had studied about Cooper in the 1980s and had been impressed
with the company ever since.

Deal with Cooper5

On June 12, 2013, Apollo tyres announced the acquisition of US based Cooper Tire & Rubber Co.
The merger would result in the formation of seventh largest tyre company in the world. Apollo
saw a huge strategic fit with Cooper from a geographical perspective. Apollo was big in India,
Europe and Africa and Cooper was well established in North America and China. From products
perspective, Apollo had made inroads in OEM market and Cooper had a significant presence in
the replacement tyre market.

It was conceived as an all cash deal. Under the terms of the agreement, approved by the boards of
directors of both companies, Cooper stockholders would receive $35.00 per share in cash. The
deal was valued at approximately Rs. 14,500 crore ($2.5 billion. As part of the deal, Apollo Tyres
would take over the operations of the American firm, including eight plants and 14,000 employees
spread across different parts of the world. The deal would have helped Apollo raise its production
from 1500 tonnes per day to 3500 tonnes per day.

COOPER TIRES – THE TARGET6

Cooper traced its roots back to Akron, Ohio when two brothers-in-law purchased the M & M
Company in 1914, making tyre patches and repair kits. The owners then purchased the Giant Tire
& Rubber Company to make "rebuilt" tyres and moved the business to Findlay, Ohio, in 1917.
Another investor, a Cincinnati-based auto parts dealer named Ira J. Cooper, established The
Cooper Corporation in 1919 on an adjacent property for manufacturing new tyres. These two
companies merged with The Falls Rubber Company of Cuyahoga Falls, Ohio in 1930 and formed
The Master Tire & Rubber Company.

In 1946, the company name was changed to Cooper Tire & Rubber Company. In 1960 the company
was listed on the New York Stock Exchange. Cooper completed research and development of its
own radial tire manufacturing equipment and in-house product testing in 1973 and began full-scale
production of steel-belted radial passenger tires at its US plants the following year following the
changing trends.

1980s was a period of great changes in the tire industry in US. Many tire manufacturers got out of
production and downsized. Cooper on the other hand, went on a consolidation spree, bought out
the competitors and upgraded their plants. It continuously invested money in research and
development. As a result of these efforts, the company prospered lot in the early 1990’s and
expanded in European markets inorganically through acquisitions. But by the time the new
millennium came around, Cooper started struggling due to high raw material prices and
consolidation among other major players in the market.

Roy Armes7 joined Cooper in December 2006 as its CEO and President, and a year later, was also
appointed Chairman. Prior to joining Cooper, Armes spent more than three decades at Whirlpool
Corporation in leadership positions throughout the business and in multiple geographies. Under
his leadership, Cooper started looking at inorganic strategies to consolidate its position in the tyre
market worldwide.
Cooper was on the lookout for new markets and new products. As a step in this direction, it setup
a joint venture with Chengshan Group, which was the third largest tyre company in China, to
manufacture and sell its products in China.

In a further bid to shore up its market share, it started talking to Apollo tyres for a possible off take
arrangement. The talks centered on possible expansion of both companies together in Europe and
Africa. During these talks, Apollo made a bid for Cooper with a 40% premium on its stock price.
This prompted the board of directors of Cooper to unanimously accept the deal.

As a result of the deal with Apollo, Cooper would become a privately held company, and its
common stock would no longer be traded on the New York Stock Exchange. It was expected that
Cooper would continue to be led by members of its current management team, and would continue
to operate out of its facilities located around the world. Cooper would continue to recognize the
labour unions and honour the terms of collective bargaining agreements in effect while generally
maintaining compensation and benefit levels for nonunion employees.

CHENGSHAN GROUP – THE CATALYST8

Chengshan Group is so named after the city in which it is located. The group was first established
in 1976, when 67 Chengshan pioneers started an undertaking on the fen land of western outskirts
of Rongcheng City on the basis of poor situation. The group made big inroads in the area of
construction and production due to their hard work, unselfish dedication, enterprising nature and
continuous striving for the best. Over time, with the good will developed in China’s tire industry,
the Chengshan group worked hard to become one of the biggest players in the Chinese markets.

In 1981, the Chengshan group was not included in the original designated enterprise list of the
Chinese government. But without losing heart, the group developed path breaking technology in
the area of vulcanizing machines, forced the government to rethink and ultimately include
Chengshan as one of China’s sixty designated factories. Chengshan was one of the first companies
in China to produce world quality radial tyres with China made raw material and production
equipment.

Chengshan to this day remains a state owned enterprise. Che hongzhi is the chairman of the group
since 2000. He is a member of Chinese Communist Party and a senior economist. He has worked
asthe Secretary of the Town Party Committee, the Chief of Investment Promotion Bureau of
Rongcheng City before joining Chengshan. He was appointed as the Chairman and the Secretary
of the Party Committee of Chengshan Tire Co., Ltd. in Oct. 2000. During his tenure, the group has
grown leaps and bounds and apart from tyres, it is also in the business of steel, rubber, construction,
hospitality, real estate etc. Currently the group employs 7000 people and has assets woth 3.9 billion
yuan. Che Hongzhi is widely regarded as one of the top entrepreneurs and business leaders in
China.

Cooper Tire and Rubber Co. and Chengshan Tire Co. Ltd.9
In February 2006, Cooper Tire & Rubber Co. purchased 51% shareholding of Shandong
Chengshan Tire Co. Ltd which was the third largest tyre manufacturer in China at the time. As a
result of the deal, two new companies were formed: Cooper (Shandong) Passenger Tire Co. Ltd.
and Cooper Chengshan (Shandong) Truck Tire Co. Ltd. Chengshan built passenger and light truck
radials, in addition to bias and radial truck tires and increased both the product portfolio as well as
geographical reach of Cooper. In 2010, Cooper bought another 14% stake in the company, thus
holding 65% of Chengshan Tyres.

Dilemma of Chengshan10

Che Hongzhi was not comfortable with the idea of an Indian company holding majority shares in
his group company. He expressed his desire to counterbid for Cooper and according to
unconfirmed reports bid $38 per share. This was $3 higher than the Apollo bid but supposedly was
rejected by the Cooper board.

After the announcement of the merger in, Neeraj Kanwar(MD of Apollo Tyres) flew to
Rongcheng, China to meet Che. He was very reluctant to talk and expressed his displeasure on the
deal. The meeting was very short and was considered more as a formality than any substantial
discussions on the deal.

Immediately after the announcement of deal, there was a strike but the workers resumed work one
week later. The chines union also gave advertisements in Wall Street Journal criticizing the deal
and also approached bankers for Apollo Tyres to step back from the deal.

On July 13, 2013, exactly one month after the deal was announced; more than 5000 workers at
Cooper Chengshan Tire Co. halted production and went on strike. Chinese workers expressed their
fear regarding the deal. They believed the deal was not in their interest and also expressed doubt
over Apollo’s capability of servicing the loan taken for acquisition purpose. The factory restarted
after a few days but the plant stopped production of Cooper brand of tyres. The situation got
grimmer when Cooper representative were barred from entering the factory premises and were
also not allowed to look at any financial data pertaining to the company.

POWER OF THE CATALYST IN THE DEAL11

In October 2013, Cooper filed a case against Apollo claiming they had buyer’s remorse and were
not negotiating with the unions in good faith. Both the lower level court and the Supreme Court
ruled in Apollo’s favor. On December 30, 2013, Cooper announced the termination of the merger
deal. Chengshan was not happy with Cooper’s behavior in the negotiation. They contemplated on
ending their association with Cooper Tires.
Exhibit 1: The reactions of the stock market for Cooper Tire and Rubber Co.

Source:
http://finance.yahoo.com/echarts?s=CTB+Interactive#{"customRangeStart":1364754600,"custo
mRangeEnd":1388428200,"range":"custom","allowChartStacking":true}
Exhibit 2: The reactions of the stock market for Apollo Tyres

Source:

http://finance.yahoo.com/echarts?s=APOLLOTYRE.BO+Interactive#{"customRangeStart":1364
754600,"customRangeEnd":1388428200,"range":"custom","allowChartStacking":true}
Exhibit 3: Time line of the deal

Date and Year Transaction

October, 2012 Negotiations start between Apollo Tyres and Cooper Tire and Rubber
Co.
12 June 2013 Apollo-Cooper merger deal announced
13 June, 2013 Impromptu strike declared in Cooper Chengshan in China. Finishes in
a weeks
July 2013 Apollo and Cooper fail to reach a consensus regarding union issue and
Chengshan issue
12 July 2013 Chengshan workers go on indefinite strike and lock out Cooper
representatives
October 2013 Cooper sues Apollo on buyer’s remorse and asks compensation
November 2013 Court rules in Apollo’s favour, Cooper goes to Supreme Court
Early December Supreme Court rules in Apollo’s favour
2013
30 December 2013 Cooper announces termination of merger with Apollo
Exhibit 4: Main Players in the case

NEERAJ KANWAR of APOLLO TYRES12

Neeraj began his career with Apollo Tyres as Manager, Product & Strategic Planning, where he
played a crucial role in creating a bridge between the two key functions of manufacturing and
marketing. In 1998, he joined the Board of Directors and was promoted to Chief, Manufacturing
and Strategic Planning.

In 2002, he took over as the Chief Operating Officer of the organisation, wherein he introduced
value-driven process improvements in human resources and information technology. Neeraj
Kanwar was appointed Joint Managing Director in 2006 and elevated to Vice Chairman in 2008,
and soon after to Managing Director in 2009 for his initiatives in establishing the company in the
global arena.

He is responsible for crafting Apollo’s growth story -- taking the company from US$450 million
to US$2 billion within a 5 year time span. Under his able leadership Apollo acquired Dunlop Tyres
International in South Africa and Zimbabwe in 2006, and Vredestein Banden B V in the
Netherlands in 2009 -- thereby transforming itself into a multigeography company with operations
in 3 continents.

He is an engineering graduate from Lehigh University in Pennsylvania, USA, Neeraj is an avid

sportsperson. He prefers to spend his leisure time with his family or playing tennis, swimming and
travelling.
ROY ARMES of COOPER TIRE AND RUBBER13

Roy Armes is Chairman, Chief Executive Officer and President of Cooper Tire & Rubber
Company, a $3.4 billion tire design, manufacturing and marketing company with approximately
8,000 employees worldwide. He joined the company in December 2006 as its CEO and President,
and a year later, was also appointed Chairman.

Prior to joining Cooper, Armes spent more than three decades at Whirlpool Corporation in
leadership positions throughout the business and in multiple geographies. His career highlights at
Whirlpool included positions such as Senior Vice President, Project Management Office;
Corporate Vice President and General Director, Whirlpool Mexico; Corporate Vice President,
Global Procurement Operations; President/Managing Director, Whirlpool Greater China; Vice
President, Manufacturing Technology, Whirlpool Asia (Singapore); and Vice President,
Manufacturing & Technology, Refrigeration Products, Whirlpool Europe (Italy).

Armes serves on the board of directors of The Manitowoc Company and AGCO. He is a former
Chairman (2011-2013) of the Rubber Manufacturers Association (RMA). Armes earned a
Bachelors of Science degree in mechanical engineering from The University of Toledo in 1975.
CHE HONGZHI of CHENGSHAN GROUP

Che Hongzhi was born in June 1956, a native of Rongcheng City of Shandong Province. He is a
member of Chinese Communist Party, a senior economist. He started working in 1974, serving
first as a Teacher in Middle School, then the Secretary of Education Commission, the Secretary of
the Town Party Committee, and the Chief of Investment Promotion Bureau of Rongcheng City.

In 2000, he was appointed as the Chairman and the Secretary of the Party Committee of Chengshan
Tire Co., Ltd. In Oct. 2003, he was also appointed as the Chairman and the President & Secretary
of the Party Committee of Chengshan Group Co., Ltd. He is serving in this position till now.

He has been elected as National Working Model, one of the Top Ten Excellent Entrepreneur in
China, the Most Influential Leader in Wealth Creation, the Technology Leader of Chinese Rubber
Industry, the Working Model in Shandong Province, the Labor Medal for Enriching Civilians and
Vitalizing Shandong, the Top Ten Entrepreneur in Shandong Province, the Widely Supported
Entrepreneur in Shandong Province, the Entrepreneur with Best Public Image in Shandong
Province, the First Pioneering Entrepreneur with Outstanding Contribution in Weihai City, the
Member of the Tenth National People's Congress, as well as awarded the Contribution Prize and
the Prize for Science and Technology Progress in Shandong Province.
Exhibit 5: Newspaper Report

Source : http://www.tirereview.com/strike-over-apollo-acquisition-persists-at-cooper-chengshan/

End Notes:
1 Mishra, Ashish k., How the Apollo, Cooper Deal Was Botched, accessed on December 21st, 2017,
http://forbesindia.com/article/boardroom/how-the-apollo-cooper-deal-was-botched/37019/0.
2 Modern Tire Dealer, accessed on December 21st, 2017. http://www.moderntiredealer.com/news/398170/exclusive-roy-armes-

talks-about-cooper-apollo
3Mishra, Ashish k., How the Apollo, Cooper Deal Was Botched, accessed on December 21st, 2017,
http://forbesindia.com/article/boardroom/how-the-apollo-cooper-deal-was-botched/37019/0
4 Apollo Tyres Ltd., accessed on December 23rd, 2017,http://economictimes.indiatimes.com/apollo-tyres-
ltd/infocompanyhistory/companyid-63.cms.
5 The Hindu, Apollo Tyres in $2.5-billion deal to buy U.S.-based Cooper Tire

http://www.thehindu.com/business/Industry/apollotyresin25billiondealtobuyusbasedcoopertire/article4807720.ece
6 Company website, accessed on December 23 rd, 2017, http://www.coopertires.com.au/about-us/history-of-cooper-tires/

7 Company website, accessed on December 23rd, 2017, http://coopertire.com/About/Executive-Leadership/Roy-Armes.aspx

8 Company website, accessed on December 23rd, 2017, http://en.chengshan.com/columns_detail/&columnsId=57.html
9 Modern Tire Dealer, accessed on December 21 st, 2017. http://www.moderntiredealer.com/news/385598/cooper-finalizes-

chengshan-acquisition
10Mishra, Ashish k., How the Apollo, Cooper Deal Was Botched, accessed on December 21st, 2017
http://forbesindia.com/article/boardroom/how-the-apollo-cooper-deal-was-botched/37019/0
11Mishra, Ashish k., How the Apollo, Cooper Deal Was Botched, accessed on December 21st, 2017.
http://forbesindia.com/article/boardroom/how-the-apollo-cooper-deal-was-botched/37019/0
12Company website, accessed on December 23rd, 2017. www.apollotyres.com/uploads/Neeraj_Kanwar_1.pdf
13 Company website, accessed on December 23rd, 2017. http://coopertire.com/About/Executive-Leadership/Roy-Armes.aspx