A few days ago, the world ranked No. 8 and No. 2 in the United States , mainly to replace the tires of the US Cooper tires , due to the collective boycott of employees of a Chinese factory - Cooper Chengshan Tire Co., Ltd. (hereinafter referred to as "Cerbium Chengshan"), its board of directors The sale of 2.5 billion U.S. dollars, involving eight factories, was forced to end.
Solid platinum Chengshan Tire Co., Ltd.
Helpless ending
Eight years ago, Sino-US shareholders established a joint venture with Cooper Chengshan and the United States holds 65%. After experiencing “seven-year itchâ€, in 2013, one of the top ten tire manufacturers in the world and the second largest US-owned tire company listed in the company wanted to sell eight tire factories worldwide to Apollo India. However, the largest cross-border M&A case in the history of the global tire industry has been met with a suspension of work by employees of Cooper Yamato.
On October 8th, 2014, Shandong Chengshan Group, a Chinese shareholder of Cooper Chengshan, announced that Chengshan Group had issued a notice to US Cooper on September 30, 2014 on the last day of the acquisition deadline: the total value of the investment was US$284.5 million. Acquired 65% of its shareholding in Cooper Chengshan.
Cooper Chengshan is the largest of the Cooper's eight tire plants worldwide, with the highest profits and the fastest growth. After more than a year of games, Sino-US shareholders finally reached a settlement. As the Chinese shareholders are about to acquire control of the US side, this cross-border marriage attracting worldwide attention is expected to be completely ended by the end of the year.
As the spokesperson for the incident, Liu Shuhong, Minister of Legal Affairs of Shandong Chengshan Group, stated that after the establishment of the joint venture factory, the Sino-US corporate culture has undergone a long period of hard work, and once the cooperation has performed well, the company has become the most profitable factory. The relationship between the two parties has already broken and they have to break up."
Liu Shuhong said that in accordance with relevant policies and regulations, this cross-border transaction of stock rights still requires the approval of relevant government departments. If the equity is delivered smoothly, it is expected that the acquisition can be completed by the end of this year and the US shareholders will completely withdraw.
According to the settlement agreement reached by the shareholders of both parties on August 15, the Chinese shareholder has the right to purchase shares within 45 days; if the Chengshan Group does not make the acquisition, the US shareholders have the right to purchase 35% of the equity held by Chengshan Group. If neither of the parties finally chooses to purchase, Cooper Chengshan will continue to operate according to its current structure.
From June 2013 until now, from employee protests to exercise of repurchase, Cooper Chengshan experienced the most turbulent period since its establishment.
On June 11 last year, Cooper Tire Company of the United States issued an announcement stating that it will sell 8 factories worldwide to Apollo Tire Co., Ltd. for 2.5 billion U.S. dollars. Immediately after this news came out, it immediately attracted the employees of Shandong Rongcheng joint venture factory and the Chinese shareholders’ objection.
According to the announcement, Apollo’s purchase of eight factories will be achieved through 100% debt. Among them, Apollo Bank borrowed 450 million U.S. dollars, and Cooper Tire raised $2.1 billion through its own debt issuance and bank loans. If the mergers and acquisitions are implemented, Apollo and Cooper Tire will bear heavy debts and the annual financing cost will be 150 to 200 million U.S. dollars. The average annual pre-tax profit of Cooper Tire's tires for the past five years is only US$100 million.
According to Yue Chunxue, chairman of the Cooper-Pingshan Chengshan Labor Union, this is a merger and acquisition of “snacks and swallowsâ€, and it is a transaction that is extremely unfavorable to the company.
Previously, Sino-U.S. shareholders had paid a huge price for the cooperation of different cultures within seven years of cooperation. Before the joint venture, Chengshan Tire had a pre-tax profit of 29.26 million U.S. dollars. In the first four years after the joint venture, the profit was only 19.31 million U.S. dollars. To this end, the United States replaced five general managers in four years. It was not until the last three years that the performance of the company was improved, and the average annual profit before tax increased to US$72.57 million. Yue Chunxue pointed out that once it is acquired by Apollo, the company will once again enter the three-party cultural run-up period between China, the United States, and India.
However, Miller, Vice President of Cooper of the United States, believes that the United States’ shareholder group strongly supports this M&A. In their votes, the number of support votes exceeded 95%.
However, according to Liu Shuhong, this is due to the lack of supervision of the Cooper board of directors. In 2014, it was the 100th anniversary of the establishment of Cooper of the United States. The equity structure of enterprises has been decentralized after a hundred years of change. There are no absolute major shareholders, and corporate decisions are largely controlled by the board of directors. Liu Shuhong pointed out that once the deal is reached, the board of directors and individual executives will receive tens of millions of dollars in benefits, but the interests of the employees of the factories will be damaged.
Each weight
In June 2013, the employees of Cooper Chengshan stopped work twice and protested mergers and acquisitions. U.S. executives are urgently flying to the other side of the ocean to mediate. Ma Yifu, an employee representative who participated in the negotiation, recalled that in the company’s top floor conference room, the union’s representatives were very excited. In the face of U.S. Cooper’s vice president Miller, there was only one condition for the resumption of work – the termination of mergers and acquisitions.
The US Cooper company suddenly fell into a dilemma and the negotiations were deadlocked.
On the one hand, with the Apollo company already signed, preparations for various mergers and acquisitions have already begun; on the other hand, the employees of the subordinate factories are fierce and resist the resolutions of the board of directors. Unfortunately, this factory is one of the largest, most profitable, and fastest growing, while Apollo India also attaches great importance to the Chinese market and hopes to take the opportunity to enter.
In this game between the board of directors and the trade unions and workers, even though the U.S. shareholder holds a majority stake, in fact the workers have far more weight in the hands than the board of directors far from the ocean.
After two shutdowns, despite the joint venture's resumption of production, the refusal to produce Cooper's products made Cooper face the risk of order breaches; the company’s union even established a “picking team†to prevent US management personnel from entering the factory. At the same time, the joint venture factory also refused to provide financial data to the US shareholders. The third quarter financial report originally scheduled to be released in November last year was postponed. As Cooper of the United States is a listed company, if it continues to stalemate, it will not only fail to complete the transaction with Apollo assets, but will also be punished by the US Securities Regulatory Commission.
In fact, after the M & A boycott in China, it also received resistance from the workers and the U.S. Steel Workers Federation in the United States. The union asked that in order to protect the interests of 2500 employees of Cooper Tire's two US factories, Cooper Tire must not sell two American factories to Apollo before reaching a labor agreement.
The U.S. shareholder who had no means to do anything had to rush to the Chinese government for help. Vice President Miller, who is responsible for mediation, believes that as a major shareholder with 65% of equity, the company’s legitimate rights and interests have been severely damaged. He had several meetings with the local Weihai government and the Shandong provincial government. After listening to the appeals and concerns, the government did not give any solutions.
Until December 30, 2013, the deadline for the transaction approached, the US Cooper who had a nail in China turned to try to pressure Apollo India to complete the acquisition. Cooper has stated publicly that if Apollo does not fulfill its purchase agreement, it will face a claim of 112.5 million U.S. dollars. However, the shutdown of the factory workers protested how Apollo dared to enter.
Subsequently, Cooper filed a lawsuit with the United States Delaware Chamber of Equality in an attempt to delay the transaction intentionally by Apollo, but the court made a ruling in favor of the defendant. After Cooper's appeal to the Supreme Court of the state, he was dismissed again.
In the end, Cooper and Apollo broke up and the largest cross-border M&A deal in the world’s tire industry has disappeared.
Lost Shandong
In this transaction, Cooper of the United States not only failed to realize the purpose of realizing the sale of eight tire factories, but also worsened the relationship with employees and business partners, and suffered huge economic losses. In June 2013, the share price of U.S. Cooper was still at US$34.8 per share, and it fell below US$26 per share in mid-October. After the acquisition was announced, Apollo's share price on the Bombay Stock Exchange once fell by 27%.
According to the announcement of Cooper Tire, its operating profit for the third quarter of 2013 was US$ 28 million, a decrease of US$ 102 million compared to the same period in 2012. One of the influencing factors was the suspension of construction of the Cooper Chengshan plant.
On December 30, 2013, after the merger was forced to end, on January 29 of the following year, Cooper signed a “reconciliation agreement†with the Chinese shareholders and agreed to hand over the controlling shareholding of the company.
According to Liu Shuhong, Minister of Legal Affairs of Shandong Chengshan Group, who participated in the contract, both parties jointly employed Deloitte and Touche Certified Public Accountants to evaluate corporate assets and prepare for the acquisition of shares. In the end, the total value of Cooper's Chengshan Mountain was 437 million U.S. dollars, and the Chengshan Group will pay 285 million U.S. dollars (equivalent to 1.7 billion U.S. dollars) to buy 65% ​​of the shares held by Cooper.
At the time, the United States invested 70 million U.S. dollars in cash, which accounted for 65% of the equity. Today, this investment has quadrupled in eight years. It is not easy for the Chinese shareholder and Chengshan Group to want to use this fund at one time. Liu Shuhong said frankly, "The Chengshan Group will use half of the cash and half of the loan to complete this cost. There is no financial obstacle to the acquisition of equity."
The annual profit of the Cooper Chengshan Plant is relatively high. Even in 2012, when the global tire industry was overcapacity and the market was sluggish, the plant still achieved revenue of US$110.23 billion and pre-tax profits of US$106.53 million. The Shanshan Group's pawn companies, small loan companies and other financial businesses will be able to absorb some of the funds.
In addition to huge financial pressure, the Shanshan Group after “single-flying†has to deal with issues such as branding, capacity digestion, and market sales. The joint venture factory produces up to 30,000 tires a day, but due to a serious overcapacity in the domestic market, the capacity utilization rate of the tire industry in Shandong Province is currently only 60%.
However, after the sudden "breakup", Cooper of the United States to maintain stability in China and the global market, the short term still needs the factory to provide products. “The two parties have reached an agreement that the original joint venture plant will be Cooper's OEM and produce the Cooper branded products before mid- 2018,†said Chen, manager of Cooper Tire's Asia-Pacific Markets Department. “In fact, this was also given to Chengshan. The group took a break from rebuilding market channels.
The original period of cooperation for this “cross-border marriage†was 50 years, and it was forced to end only in 8 years. The original scene of the celebration of cooperation was still vivid, but now it is a matter of fact. According to Liu Shuhong, Minister of Legal Affairs of Shandong Chengshan Group, “The world is hard to predict†is not evaluated.
Juice Extractor,Juice Maker,Juicer Blender Mixer,Grinder Juicer
Evergreen Houseware , https://www.jmelectricalappliance.com