December 23, 2024

Cooper Chengshan Tire International Marriage encounters “seven-year itch”

US $ 2.5 billion takeover Cooper Tire and Apollo Tires, India's thousands of miles away and detonated the Sino-US joint venture --- Cooper Chengshan (Shandong) Tire Co., Ltd. (hereinafter referred to as "Cooper Chengshan") of Strike to protest.

Solid platinum as a mountain strike

The turmoil caused by the continuous fermentation has not yet come to an end. The Chinese parent company of Cooper Chengshan, Chengshan Group, is gradually becoming a new focus of attention.

Seven years ago, Cheng Shan Tire, one of China's third largest state-owned tire manufacturers, took the initiative to select foreign investors and allowed foreign parties to control the company when it was the most brilliant. Seven years later, it took a difficult period of running-in. At the time when the foreign team is about to change hands, the intention of Chengshan Group to recover its equity is obvious.

Right now, Cooper Chengshan and Chengshan Group, which are in the center of the storm, have already been interviewed by the media. The reporter called Chengshan Group on August 16th. Its staff only stated that "the company's leadership is in a meeting. Other circumstances are not clear."

The reporter sent an e-mail to Anne Roman, Vice President of Communication and Public Affairs of Cooper, USA. In an email reply, the reporter stated, “Cupelo Chengshan is temporarily suspended. US Cooper continues to operate normally in other factories in China and around the world. The company is communicating with customers on product supply issues ... (currently) the situation is not expected to affect the ongoing acquisition."

Founded in 2006, Cooper Chengshan is only one of Cooper's joint venture subsidiaries in the world, but it is the most important core asset of Chengshan Group. Although Chengshan Group has now straddled many industrial sectors, the strategic significance of the tire industry is still unusual. Whether or not Chengshan Group can regain control of the tire industry in the future may be more dependent on how much it is willing to pay.

Core assets "in hand" foreign investment

In recent years, the Chengshan Group, which has been diversified by the industry, has also been involved in various fields, such as steel cord production, rubber planting and processing, marine biological engineering, real estate development, ecotourism, hotel management, and financial pawn, in addition to the tire industry. In spite of this, the tire industry still occupies the core proportion in the asset structure of the Chengshan Group. From January to February of this year, Chengshan Group's total operating income was 1.2 billion yuan; during the same period, sales revenue of Cooper Platinum reached 1.17 billion. yuan.

Why did the Chengshan Group take advantage of the tire industry and established a joint venture with Cooper? This makes the outside world quite puzzled. According to Che Hongzhi, Chairman of Chengshan Group, “The era of the single-handedness of the enterprise has passed. Establishing a strategic cooperative partnership with Cooper of the United States will enable Chengshan’s capital to further socialize and internationalize.”

Time goes back to October 2005. Just a year after Chengshan Tire was identified as "China Top Brand", in the context of the joint venture in the domestic tire industry, Cooper officially announced the "hand in hand" of Chengshan Tire, which also surrendered. Controlling power.

The Associated Press reported in December that the US Cooper had obtained the necessary government approval documents and held 51% of the joint venture company. In addition, it will hold 25% ownership of a local steel wire factory. According to reports, U.S. Cooper paid about 70 million U.S. dollars in cash for the above acquisition.

Chengshan Group holds 49% of the joint venture company. However, according to the Reporter’s reporter, the transaction also includes the selling rights of Chengshan Group—the Chengshan Group has the right to sell the remaining 49% of the shares to Cooper of the United States from January 1, 2009 to December 31, 2011.

In January 2006, Cooper Platinum officially opened its doors. According to reports at the time, the project had a total investment of 400 million U.S. dollars. By the end of 2009, Chengshan Group had liquidated its original Chengshan tires, which also meant that the original assets and businesses of Chengshan Group that were originally related to tire production and operation were all transferred to joint venture companies.

Also in 2009, Chengshan Group informed the US Cooper that it is considering exercising its selling rights and will sell 14% of its shares. In March 2010, Cooper announced that its stake in Cooper Chengshan will be increased from 51% to 65%, and the value of the 14% of the shares it holds will be close to US$18 million.

It is worth mentioning that the timing of the Chengshan Group’s decision to reduce the stake in Cooper’s Chengshan Mountain was very subtle. At that time, the United States’ special case against China’s tires was becoming a focus of economic and trade circles. Cooper Chengshan was greatly affected in the 2009 special tire protection project, which at that time accounted for nearly 30% of the export volume of American tires.

A wholly-owned acquisition "takes a long time to communicate"

In fact, after the establishment of Cooper Chengshan, the cooperation between China and the United States was not as smooth as originally envisaged, and it has been in a state of continuous cultural cooperation.

The union of Cooper Chengshan stated in an open letter to all Cooper Tire employees that "despite the hard work of the two parties, they still paid a heavy price." In the first four years, they replaced five general managers, and since then the operating performance It has been upgraded to reach the best period of eight years of joint venture.

According to Cooper Chengshan, the company is the “largest, best-profit, fastest-growing company” among Cooper's eight largest plants in the United States. It is reported that Cooper Chengshan is the mainstream supplier of more than 30 large-scale mainframe plants such as China National Heavy Duty Truck (Tongba), FAW-Volkswagen, Baotou North-Benz, and BMW Brilliance. In 2012, Cooper made a pre-tax profit of more than 100 million U.S. dollars, setting a record for the year.

However, just two months ago, the world’s 11th-ranked Cooper announced that it will be acquired by Apollo Tire, the 16th largest in the world, and the two companies will form the world’s seventh largest tire company after the merger. Cooper Chengshan in Shandong will also be included in the world map of Indian tire giants.

The deal triggered a strong dissatisfaction with Cooper's success. In the above-mentioned open letter, Cooper’s Union of Trade Unions emphasized that “Apollo Tire’s US$2.5 billion acquisition of US Cooper through 100% debt” and Cooper Chengshan is concerned about the prospects after being acquired.

Since then, the Chengshan Group posted a “Chengshan Group’s letter to the Cooper Chengshan Trade Union” on its official website, indicating that the Chengshan Group supports the firm attitude of Cooper’s Chengshan Trade Union. In this letter, Chengshan Group also revealed its intention to buy back Cooper Chengshan’s US share.

Chengshan Group stated that it has conducted consultations with senior US Cooper leaders. In the first round of talks held at the end of June, the two sides discussed four proposals. The first proposal was "The Chengshan Group agreed to the Apollo Acquisition" and the second was "The Chengshan Group's overweight acquisition of the US Cooper." As a result of the talks, these two options are not feasible.

The third and fourth options are currently feasible. That is, Chengshan Group agrees to Option One, but begins to prepare for a wholly-owned acquisition of Cooper Chengshan; or “The Chengshan Group immediately informed Apollo that the tires were firmly opposed to the acquisition, and immediately proceeded with it. A wholly-owned acquisition of Cooper Chengshan." However, Chengshan Group stated that the two programs "need longer time for communication and consultation."

AnneRoman said in an e-mail to the reporter that “the company is continuing to work hard to get Cooper Hill back to work as soon as possible... The merger and acquisition transaction between Cooper and Indian Apollo tyres is progressing well and is expected to be completed by the end of this year. The deal will All plants that benefit U.S. Cooper - including Cooper's Mountain.  

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