Cooper Tire & Rubber Company (CTB) reported Wednesday morning that it has inked a definitive merger agreement to go private by being acquired by India-based Apollo Tyres Ltd. for about $2.5 billion in cash, creating the seventh biggest tire company in the world by sales. The agreement puts a value on CTB shares at $35.00 each, representing a 40 percent premium to the company’s 30-day volume-weighted average price and 43 percent premium to Tuesday’s closing price.
Collectively, Cooper and Apollo generated $6.6 billion in sales in 2012. Cooper reported net sales of $4.2 billion for the year, up 7 percent from 2011. Cooper also posted record operating profits in 2012 of $397 million.
“This transformational transaction provides an unprecedented opportunity to serve customers across a host of geographies in both developed and fast-growing emerging markets around the world,” said Onkar S. Kanwar, chairman of Apollo, in today’s statement. Kanwar’s father founded Apollo in 1976.
Roy Armes, chairman, chief executive and president at Cooper said the acquisition is in the best interest of Cooper shareholders and “offers attractive benefits to [Cooper’s] customers and employees.” He added, “Together, our two organizations have almost no geographic overlap and significant opportunities for growth.”
The acquisition gives Apollo access to the robust U.S. markets, where it currently has little market penetration. The company has expanded through sizable acquisitions every few years, including Netherland-based Vredestein Tires in 2009 and South Africa’s Dunlop Tyres Intl. Ltd. in 2006.
The boards of both companies have approved the deal. Pending all other necessary approvals, the transaction is expected to close in the second half of 2013.
Findlay, Ohio-based Cooper, who makes tires for passenger cars and light trucks under its namesake brand, Starfire, Mastercraft, Roadmaster and other brands, is currently the eleventh largest tire maker in the world by sales. The company was found in 1914.
Apollo, a high-performance tire manufacturer, has manufacturing units in India, the Netherlands, and South Africa and exports its products around the world.
Shares of CTB have been range bound for 2013, essentially stuck between $24 and $26.50, except for a few fluctuations. Shares gapped ahead to near the buy-out price at the opening bell and are holding around $34.50 around noon EDT.
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