Apollo Tyres hits new high

Apollo Tyres is in the limelight today, with the stock price up over 4% at Rs.106, with an intra day high at Rs.113, which is a new 52-week high.

Yesterday, US based tyre maker Cooper Tire & Rubber Company stated that it was terminating the merger agreement with Apollo Tyres. The market, which was never in favor of this deal, given the kind of stress it would have created on Apollo’s balance sheet, is very relieved and this sentiment is reflected in the stock price, which despite the deal being scrapped, has gone on to hit a new high.

There would be some legal implications of this deal. Cooper has stated that Apollo has breached the merger agreement and it plans on taking legal action and will seek compensation for damages caused. As per the deal, if anyone, either Cooper or Apollo calls off the deal, it would have to pay a ‘break fee’ of $50 million, which Cooper says, it does not need to pay. On the other hand, Cooper says that Apollo will have to pay it $112 million as ‘break fee’ as it believes, it was Apollo which broke the deal due to its inability to close the deal and not being able to arrange bank finance within the stipulated time.