Delaware Chancery is usual open to fast tracking a trial when compelling reasons exists for expedition. In view of the potential termination of financing in November that appears to be a compelling reason. I also suspect that when CTB reports quarterly results on Nov. 1, it will include consolidated financial statements from its Chinese J.V. to render Apollo's China argument moot. That leaves the USW, and based on reports, they are more than willing to negotiate with Apollo because they have substantial leverage at this point. If the judge fast tracks the trial, expect a pre-trial conference in which the judge attempts to resolve this matter via price reduction, but more in line of $1 or $2, not the $8 or $9 sought by Apollo.
The merger agreement "precludes Apollo from using labor issues or disputes with Cooper's partners as a reason to adjust the terms." All legal issues favor CTB. They only reduce price to entice Apollo to make the deal. CTB could just as easily either accept the $112.5 million break up fee OR sue Apollo for much more. I do agree that any price reduction will be small and require new shareholder vote.
But if CTB does reduce price, they should get something in return like:
-2X break up fee to $225 million.
-Firm close date that also requires Apollo to have deal with USW.
-One day past that date would trigger automatic Apollo payment of higher break up fee. This ends any more delays by Apollo.
I agree that Cooper will require strict assurance of closure if they reduce the price. The complaint indicated the last Apollo bid before the $35 was $33. Also, Apollo's original reduction request was $2.50 off the bid. I assume Cooper could sell a $33 offer to shareholders since it appears that is around what the bidder competing with Apollo bid, It looks like $33 might get the deal done with assurance of assured funding and a drop dead close date post vote. Of course, if Apollo continues this $8 to $9 reduction talk, see you at trial.
Any change in the dollar amount would require a revote. However, after reading Cooper's complaint, Cooper appears to have a strong case and may not budge on the dollar amount (caveat: Apollo's answer is not yet filed). The picture that emerges from the complaint and exhibits is that Apollo was allowed to do ample due diligence on both the USW and China issues before agreeing to assume the labor risk in the Merger Agreement. It appears Apollo was anxious to trump other bidders and seal the deal with Cooper. After the market panned the deal, Apollo started to look for a way out.
Cooper is seeking both specific performance and money damages for Apollo's breach. The idea that Apollo can simply give Cooper $112mm and walk is in error and only works if Cooper is willing to accept that amount. However, Cooper indicates they had multiple bidders other than Apollo. Therefore, depending on these other offers, diminution in value to Cooper and its shareholders can be as high as $1 billion. If Apollo loses they are in an interesting position:
1. Close the deal on original terms
2. Attempt to tender the $112mm and walk away
If Cooper wins, I don't believe they will accept the $112mm. As regards appeal, I'm not sure who would bond a company the size of Apollo for up to $1 billion after they have already lost the case. At that point, Apollo is making a bet the company decision if they pursue an appeal. The CNBC talking head Faber does a few minutes of research on Cooper and tells you the deal is toast. Pretty simplistic analysis.