Shares of Apollo Tyres today slumped nearly 9 per cent on concerns over debt burden after Cooper Tire and Rubber Co shareholders approved the company’s $2.5-billion sale to the Indian company.
After making a weak opening, the scrip further tanked 8.33 per cent to Rs 61 on the BSE. On the NSE, the stock plummeted by 8.92 per cent to Rs 60.70.
The scrip, however, later pared some of the losses and was trading at Rs 64.95, down 2.4 per cent, on the BSE.
“The huge debt burden could strain the balance-sheet of the combined entity,” said Kishor Ostwal, CMD, CNI Research.
“A positive response from the shareholders clears the path for Apollo Tyres to complete the merger process and expects to close the transaction by year-end.
“However, hurdles still remain for Apollo Tyres due to opposition from workers at Cooper Tire and Rubber Company joint venture in China and US labour issues which could hamper the deal,” Angel Broking said in a report.
“We are pleased stockholders endorsed this compelling transaction (Cooper’s sale to Apollo Tyres), which will create a $6.6-billion leader in the tyre industry with a strong global footprint.
“This will include a presence in the world’s largest tyre market of North America as well as in the fastest growing geographies of India and China,” Cooper Chairman, CEO and President, Roy Armes, had said yesterday.
Approximately, 78 per cent of Cooper’s outstanding common shares were voted, with more than 48 million shares voted in favour of the merger, representing approximately 96 per cent of Cooper’s voted shares, the company had said.
The combined company will be the seventh-largest tyre company in the world and will have a strong presence in high growth-end markets across four continents.
On June 12 this year, Apollo Tyres had announced that it would acquire Cooper Tire & Rubber Company in an all-cash transaction valued approximately at Rs 14,500 crore ($2.5 billion).
The deal, however, wasn’t taken positively by the markets and Apollo Tyre shares tanked 26 per cent the next day on the BSE, forcing the company management to clarify that the move would not load its Indian operations with excessive debt.