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  • When Does The Ball Drop On Cooper Tire & Rubber? 33 comments
    Oct 23, 2013 2:22 PM | about stocks: CTB

    There are three worrisome dates for Cooper Tire & Rubber (NYSE:CTB). The first is December 31, 2013. When the ball drops on 2013, it also drops on Apollo's merger agreement with Cooper as well as the deal's financing commitments. Neither Apollo nor Apollo's banks have any incentives or duties to extend the drop dead date.

    Before the deal dies, there are two earlier dates worth watching. In just over two weeks from today, Cooper will need to deliver new financials to the banks, which will probably be impossible unless they can quickly resolve their problems at their Chinese subsidiary. Given that they have already made generous offers and had those offers rejected, there is little hope for such a resolution.

    But the Chinese insurrection is not only problematic for the deal's debt financing. What else? Cooper needs to be able to issue a 10-Q in order to stay in compliance with the SEC. Early next month, it may become increasingly unlikely that they will be able to do so. They will have only sixty days before they could be delisted from the NYSE.

    When does the ball drop on Cooper? New Year's Eve, at the very latest. However, like the many stores that put up Christmas decorations earlier and earlier each year, it is possible that the ball will drop before Thanksgiving. What should they do next? Many things that they are unlikely to do: settle with Apollo, use whatever payment they can negotiate as well as any financing that they can raise for a public recapitalization, settle with their Chinese JV partner, and work towards reestablishing their flagging competitiveness.

    Stocks: CTB
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Comments (33)
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  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    Chris, can you add some color on the China joint venture? It seems to be in their interest to settle and aid the merger so what is holding up reconciliation there?

     

    Also, have you re-figured the downside and upside based on the ongoing drama? If the deal does not go through and CTB does not file with the SEC although a low probability, I imagine the value drops far below the $base you were originally thinking for CTB without apollo?
    23 Oct 2013, 03:50 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » My presumption is usually that “it is just about money” and that everything can be settled and that everyone is bluffing. However, those set of assumptions do not appear to be the case here. CTB offered substantial amounts of money to the strikers early on and did not even get a response.

     

    If the deal breaks, and CCT is still up in the air, and if CTB does not file their 10-Q on time, then the stock probably goes to or even beneath $20, which is worse than I had contemplated earlier.
    23 Oct 2013, 03:57 PM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (302) | Send Message
     
    Perhaps the strikers are hoping that CTB can be rebuffed to the point that CTB is forced to give up. Then the strikers take over the factory.
    23 Oct 2013, 04:33 PM Reply Like
  • jaginger
    , contributor
    Comments (475) | Send Message
     
    I presume you are still a hold long-term based on the underlying value of the business, even through price declines could be substantial in the interim?
    23 Oct 2013, 05:24 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » My view is that there are alternatives to the deal as good or better than the deal. I think that Apollo was the least important aspect of the Apollo-Cooper deal and that a new board and management with a new balance sheet could unlock substantial value... but the route will be messy.
    23 Oct 2013, 05:34 PM Reply Like
  • arbtrader
    , contributor
    Comments (170) | Send Message
     
    In a way that is hard for us to fathom the Mainland Chinese are incredibly anti-foreign based on a long history (of real grievances) and an educational establishment that has fueled this paranoia. Witness the anti-japanese riots the past couple years. If you are not familiar w them you should be.

     

    Press comments from the locals vs the new Indian Mgt was pretty blatant. I thought it was financial at first also but a refusal to negotiate? That is very un-Chinese. They are consummate business people, some of the best in the world. Best, AT.
    24 Oct 2013, 11:21 AM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (302) | Send Message
     
    I don't see why the strike prevents a 10Q filing. Essentially the CTB portion of the JV is non-operating. The asset value / goodwill / whatever would largely be a guess, but that's not a show stopper.

     

    I think they file, but it might look pretty ugly (at this point one must consider the possibility of writing off the JV entirely, which would be pretty awful).
    23 Oct 2013, 04:32 PM Reply Like
  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    not advocating it, but what stops the joint venture from firing all workers and replacing them? I remember when CAT was struck and they put white collar folks on the line making products (effeciency was low and strikers tossed things at the scabs in Peoria, IL. Was that in early 90's?
    23 Oct 2013, 05:38 PM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (302) | Send Message
     
    1) the workers are still employed by the factor for non CTB work.
    2) I'm guessing the workers have some political backing. Normally China is pretty anti-worker (ironically, communism with chinese characteristics now means screw the little guy), but the factory bosses might well have connections. Labor law in China is even more murky than the rest of the system.
    24 Oct 2013, 01:22 AM Reply Like
  • arbtrader
    , contributor
    Comments (170) | Send Message
     
    There is also the matter of the UK pension issue suddenly appearing out of thin air.

     

    I keep reading these headlines thinking: 'what the ^%$# were the advisors on both sides charging their fees for??' Other than some smart legal inserts on the labor issues not MAC'ing the deal this thing has been like kicking a hornets nest, repeatedly. AT.
    24 Oct 2013, 11:13 AM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    Excellent points here.

     

    I have been thinking about some questions:

     

    How much of all the problems, issues, court cases, potential breakup are in the price? Chris, I remember you asking once somewhere on SA the question, 'What is known'?

     

    What are the chances that something gets worked out on the court room steps either right before or during the trial.

     

    Is the damage to Cooper's business temporary?

     

    Can Cooper's management really keep their jobs in the event of a deal break given how they handled or didn't handle the merger since day one?

     

    Who is the current shareholder base? What percentage are arbs? Value guys? Auto sector guys? What is everyone's cost basis? Who would buy CTB post potential breakup and at what price?

     

    What does Apollo want? Cooper at a discount I think.
    What does Cooper want? Would they rather sell at 27/28 or risk a lower price and crummy rep and a long climb back up the mountain?
    24 Oct 2013, 01:52 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » Those are exactly the right questions; I'm going to restrain myself from blurting out any cant replies and hope that others might take up some or all of these.
    24 Oct 2013, 01:54 PM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    http://bloom.bg/HwlShW

     

    getting close to the trial....expecting to see some turns and twists
    1 Nov 2013, 01:08 PM Reply Like
  • Roubaixgirl
    , contributor
    Comments (29) | Send Message
     
    $ctb http://reut.rs/1aEOP7r
    6 Nov 2013, 08:58 AM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    Lots of interesting stuff coming out of the trial. Today's price is the highest since the news of the lawsuit broke more than a month ago. The judge is expected to rule early next week. That gives a few days for the sides to reach an agreement......will they even try?
    7 Nov 2013, 05:59 PM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    http://bit.ly/1hQXS6D
    7 Nov 2013, 06:49 PM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    http://bit.ly/1bl2Tzq

     

    Apollo continues to believe in the merits of the combination and is committed to finding a sensible way forward.”

     

    Are they telling the truth? If so a price around 30 makes sense.

     

    But what are CTB's desires?
    9 Nov 2013, 02:52 AM Reply Like
  • Wilson Wang
    , contributor
    Comments (818) | Send Message
     
    no, 30 won't make sense, because the Chinese JV is most likely to end.

     

    28 makes more sense now.
    9 Nov 2013, 03:17 AM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    fair enough. Not sure if CTB will accept 28 though. You think they will?
    9 Nov 2013, 03:35 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » Wilson -- Many thanks for being on top of the CCT JV dynamics; hugely appreciated.
    9 Nov 2013, 07:42 AM Reply Like
  • Wilson Wang
    , contributor
    Comments (818) | Send Message
     
    No problem. I'm in Beijing now, so let's see what I can get out of these PE guys.
    9 Nov 2013, 11:53 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » That would be valuable. Thanks.
    9 Nov 2013, 11:58 AM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    http://yhoo.it/1aPzmSa

     

    article on Apollo earnings report
    11 Nov 2013, 05:41 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (4041) | Send Message
     
    Author’s reply » Thanks for the link; interesting. -C
    11 Nov 2013, 05:47 PM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    http://reut.rs/1fAaYTE

     

    article says 27 plus in a deal
    12 Nov 2013, 09:52 PM Reply Like
  • Wilson Wang
    , contributor
    Comments (818) | Send Message
     
    The mess in the China JV is definitely going to hurt results.

     

    Sources are saying that the Chinese are trying to find finance for the acquisition, but are having a real hard time with the limited liquidity. PE firms aren't willing, banks are being scrutinized, so unless they do an offshore offering for bonds, which the Chinese government will need to approve, there's little chance for a Chinese takeover here.

     

    They've spoken a few times, but no compromise. The Chinese are not standing down on this one as of yet. Cooper needs to do something. But the question is, what? Because if it can fix the JV issue, stock price should reflect 27+. So far, nothing.
    12 Nov 2013, 11:07 PM Reply Like
  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    did everyone sell out or is it quiet here because we are between judges verdicts? Does anyone know if CTB and Apollo are talking about a new number or have they stopped talks between each other and its just lawyers now?
    20 Nov 2013, 12:22 PM Reply Like
  • arbtrader
    , contributor
    Comments (170) | Send Message
     
    Out. I've rarely made money in a sideways deal so better to watch from the sidelines, in my view. Best of luck to anyone holding on...pricing is nearing interesting levels.

     

    One of my rarely-broken cardinal rules is: never let a trade become an investment. AT.
    20 Nov 2013, 12:27 PM Reply Like
  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    trade being an event type situation and investment being an ongoing growth story? Good rule.
    20 Nov 2013, 03:06 PM Reply Like
  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    no comments on CTB today?

     

    http://bit.ly/1hXqT29

     

    Not surprising that the court case was dismissed, but CTB still gets a hefty bit of cash when the deal is done. $21 seems low.
    16 Dec 2013, 03:58 PM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    http://bit.ly/1d2wXTd

     

    US govt getting involved in Chinese-Cooper saga
    23 Dec 2013, 12:52 AM Reply Like
  • jaginger
    , contributor
    Comments (475) | Send Message
     
    thanks. do you have any thoughts on how much of the chinese plant production could be picked up by the US facilities? it may very well be zero, i just don't have the data.
    23 Dec 2013, 01:29 AM Reply Like
  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    market seems pleased that CTB will be having an earnings report. This seems like a good rally to sell into. Looking to sell covered calls at $27 for May if they get to $1
    24 Apr, 08:37 PM Reply Like
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