Apollo Tyres’ acquisition of Cooper Tire looks “risky”

Analysts say management will have little room for error given the high leverage ratio.
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Cooper is the fourth-biggest tyre maker in the US
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<div style="text-align: left;"> Cooper is the fourth-biggest tyre maker in the US </div>

India’s Apollo Tyres’ planned purchase of Ohio-headquartered Cooper Tire Rubber for about $2.5 billion in cash looks expensive according to analysts.

Cooper stockholders will receive $35 a share in cash and the deal represents a 40% premium to Cooper’s 30-day volume-weighted average price, the companies said on Wednesday.

Analysts say that at 4.7 times their current estimates for enterprise value over earnings before interest, taxes, depreciation and amortisation Ebitda the deal looks expensive and would put pressure on earnings margins going forward, particularly given that the outlook for demand for tyres globally is sluggish.

The buyout will be funded through debt and after completion...

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