Recently a securities fraud class action complaint was filed against Cooper Tire & Rubber Company (NYSE: CTB) covering purchasers of CTB stock from 06/12/13 to 11/08/13. The deadline for filing to be a Lead Plaintiff is 03/18/14. Unlike many securities fraud class actions filed over the last year, we believe this one has sufficient merit for us to devote resources in the representation of investors.

First, the short version of why we think it has merit: November court testimony, in the case between Cooper and Apollo revealed that both knew, and failed to disclose to investors, that the 35% owner of Cooper’s all-important Chinese subsidiary opposed the merger. Nevertheless, Cooper went forward with the merger agreement with great fanfare to investors. New investors piled in completely unaware of the looming risk and eventual debacle.

Now the longer version.

The securities fraud class action complaint filed on January 17th in Delaware District Court, OFI Risk Arbitrages, et al. v. Cooper Tire & Rubber Company, et al., alleges that Defendants violated the federal securities laws by making materially misleading statements and omissions in connection with the proposed acquisition of the Company by Apollo, an Indian-based tire company – they announced on June 12, 2013 (the "Merger").

The Complaint alleges Cooper falsely represented the significant risks associated with the Merger by concealing the fact that the Company lacked control over its most important subsidiary, Cooper Chengshan Tire Company, Ltd. ("CCT"). Further, the Complaint alleges that Defendants concealed the fact that Cooper's joint venture partner, Chengshan Group, which had a 35% interest in CCT, opposed the Merger, and had in fact sought to acquire Cooper for itself.

Apollo’s $2.5bn, all-cash offer for Cooper ran into problems almost as soon as it was announced. Workers at Cooper Chengshan Tire, of which Cooper owns 65 percent, threw out most Cooper-appointed managers in protest at the merger and cut off Cooper from most financial information about the subsidiary’s functioning.

On October 7, 2014, Cooper filed a Form 8-K with the SEC which included a press release revealing that the Merger was in jeopardy and that Cooper had filed a lawsuit against Apollo in an attempt to force Apollo to close the deal.

On November 8, 2013, the Delaware Chancery Court denied Cooper's request for an order requiring Apollo to close on the Merger, holding that Apollo had not breached the Merger agreement. In response to these disclosures, Cooper stock fell significantly, falling from $31.27 per share on October 3, 2013, to close at $23.82 per share on November 8, 2013.

Our investigation reveals, however, that the investing public was never aware of the risks Apollo and Cooper long knew. In January 2013, Apollo and Cooper held their first serious discussions about the merger. On March 7, 2013 Apollo and Cooper apparently identified that the attitude of Cooper’s China partner, Chengshan, was a major risk. In May, the Chengshan chairman expressed words that inferred opposition to the merger. According to court testimony, Che Hongzhi, Chengshan Group’s chairman, eventually demanded $400m for his 35 percent stake in CCT, but Apollo only was willing to offer half that.

Other reported undisclosed facts from our investigation, which we believe was material to investors, include:

• Chengshan Group had been in talks about making its own bid for Cooper when Cooper agreed to a deal with Apollo;
• In March 2013, Apollo and Cooper first identified Chengshan’s objection, and in May, Mr. Hongzhi made a troubling statement to both companies in a meeting;
• Within one month of the June merger announcement, Roy Ames, Cooper’s CEO, met with Mr. Hongzhi to try to overcome his objections.

The alleged class includes all purchasers of Cooper’s publicly traded common stock between June 12, 2013 and November 8, 2013, inclusive. If you want more information on how to participate as a lead plaintiff, call Reed Kathrein at (510) 725-3000 or email us at [email protected].