Cooper CFO Brad Hughes said that Apollo breached the merger agreement and they will take legal action, including pursuing damages.
Cooper also said it did not believe that it will have to pay USD 50 million break fee that it was liable for (these are the basic break fees put down in the merger agreement if either party walks away. Cooper was to pay USD 50 million if it walked away from the deal).
"We haven't walked away, we don't believe we owe Apollo USD 50 million break fee," the company said.
It, however, said that it will pursue the USD 112.5 million break fee that Apollo owes it, along with other damages. Cooper claimed the deal was terminated because Apollo was no longer or it was clear that Apollo was not going to close the transaction and that banks were not going to finance the transaction.
Amit Tandon, Founder & MD Institutional Investor Advisory Services (IIAS), said: "It does not come as a surprise for us. When we said the deal wasn't good for the investors, to a large extent we were also echoing the view of a large set of institutional investors. A lot investors would surely be relieved that the deal has not gone ahead."
Speaking on the legal liablity Apollo may face, Hitesh Jain, ALMT Legal, said: "In the US, damages runs into millions. People can claim over 4-5 times over the break fee to intimidate the other party, whether you will get that amount realistically that's a different thing. I won't be surprised if Cooper claims over 4 times of the $112.5 million break-up fee."
Rohan Shah, Managing Partner, Eco Laws Practice (ELP) said that its very tough to estimate the amount of damages that Cooper can claim from Apollo apart from the $112.5 million. "I don't think there will be any cap in terms of what they claim. The issue is given the nature of the clause what will support them in a claim beyond the $112.5 million and what is the level of proof that they will have to meet. Because somewhere they will have to make out a case of malafide or fraud, sometheing in the nature of giving themselves the ability to reach a mutiple of what is already mentioned."
Apollo Tyres stock price
On December 30, 2013, Apollo Tyres closed at Rs 101.30, up Rs 0.55, or 0.55 percent. The 52-week high of the share was Rs 103.90 and the 52-week low was Rs 54.60.
The company's trailing 12-month (TTM) EPS was at Rs 7.24 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 13.99. The latest book value of the company is Rs 46.24 per share. At current value, the price-to-book value of the company is 2.19.
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