ERJ staff report (TB)
New York, Wall Street - Cooper Tire & Rubber Co.'s share price jumped nearly 6 percent on higher-than-normal trading on Friday, fueled by a published report that India's Apollo Tyres Ltd. is considering making a bid for Cooper.
The report, in India's Economic Times citing "sources with direct knowledge" of the deal, said Apollo Tyres is seeking to raise $150 million in new capital to be used for funding a potential acquistion of majority control of Cooper Tire.
In a statement, Cooper said it "does not comment on rumors." Apollo has not yet not replied to a request for comment.
Apollo is the world's No. 16 tyre maker with $2.56 billion in global tyre sales in 2011, while Cooper is No. 11 with $3.93 billion in sales, according to Tire Business' annual Global TIre Report ranking.
In trading today, Cooper's share price rose to $19.63 on a trading volume of 4.2 million shares, vs. the daily average volume of about 1.2 million shares. This share price is still nearly $1 below the share's high for the past 12 months.
At that share price, Cooper's market value would be more than $1.2 billion.
The Economic Times article indicated Apollo is trying to make sure it has about $600 million with which to launch a bid.
In a note to investors, Key Banc Capital Markets Inc. said it believes "investors remain skeptical that a deal will get finalised" because Cooper's stock is trading at the low end of what analysts consider the stock price range it would take to get a deal off the ground.
The bank's analyst team said it would be surprised to see Cooper sell to Apollo because the Indian company's capital structure is lower than Cooper's and would have to issue debt and equity above current levels in order to obtain sufficient funding to acquire a controlling stake.
The team also said it remains "suspect of (Cooper's) willingness to sell to a much more leveraged and smaller tyre manufacturer with virtually no significant overlapping geographic footprint."
From Tire Business (A Crain publication)