When Che Hongzhi, chairman of the Chengshan Group, met the Financial Times in September, the former local government official was in a fiery mood and remained extremely bitter about the Apollo-Cooper transaction, which the 57-year-old had been briefed on just a few weeks before it was formally announced in June.
Based in the small coastal city of Rongcheng, in eastern Shandong province, Chengshan’s interests range from traditional sectors such as automotive components and property to rather more niche ones, including micro-lending and pawnbroking. According to Chengshan executives, the group’s tyre business has traditionally been its biggest earner.
From Mr Che’s perspective, he had been jilted by a joint venture partner whom Chengshan was just learning to live with after a rocky start. Founded as a 50-50 joint venture in 2006, Chengshan Cooper Tire has benefited from the rapid growth of China’s car market and now accounts for about one-quarter of the US company’s revenues and profits.
Chengshan later agreed to sell an additional stake to Cooper, giving the Ohio-based company a controlling 65 per cent interest in the joint venture. From Cooper and Apollo’s perspective, that decision made Mr Che a passive minority investor with no right to participate in share price-sensitive discussions about a possible buyout.
Unfortunately for both Cooper and Apollo, such legal arguments mattered little to the factory’s union, which went on strike in June and eventually evicted the US company’s management from the plant. As a result, Cooper may be unable to produce the third-quarter financial figures Apollo needs to secure financing for the deal.
