UPDATE 2-Cooper loses court bid to rescue Apollo merger as deadline looms
* Delaware Supreme Court dismisses Cooper's appeal
* Apollo says continues to believe in the merits of Cooper merger
* Cooper to return to Chancery court for resolution of other issues
* Apollo shares rise as investors bet on deal collapse
(Adds Cooper comments, updates Apollo share price)
Dec 17 (Reuters) - Cooper Tire & Rubber Co's efforts to force India's Apollo Tyres Ltd to complete its proposed acquisition of the U.S. company for $2.3 billion received another legal setback, paving the way for the Indian company to walk away from the deal.
The Delaware Supreme Court on Monday dismissed Cooper's appeal against an earlier lower court ruling that Apollo was meeting its obligations to reach new contract terms with unions at Cooper plants in Ohio and Texas.
With the latest court ruling, which came three days before it was due to be delivered, the Findlay, Ohio-based company has only a slim chance to keep Apollo from walking away from the long-pending and contentious deal.
Apollo, which would become the world's seventh-biggest tire maker if the deal is completed, wants to pay less than the $35 per share agreed in June because of demands by unions at Cooper plants and disruptions at Cooper's venture in China.
Cooper wanted the Delaware Supreme Court to overturn a ruling by a judge on the lower Court of Chancery who found last month that Apollo had not breached its obligations under the terms of the deal.
"We are pleased by the decision of the Delaware Supreme Court today, which did more than dismiss Cooper's appeal; the court decided the appeal was improvidently granted in the first place," Apollo said in a statement on Tuesday.
"Cooper's litigation strategy to date has done nothing but generate unnecessary cost for its shareholders and for Apollo, and compound the obstacles that Cooper's situation has created for this merger," the Indian company said.
Apollo, which is seeking to cut its dependence on domestic sales through the Cooper acquisition, said it continued to believe in the merits of the merger and that it was "committed to finding a sensible way forward, if possible."
Cooper said that the Supreme Court verdict was a "procedural ruling" that returned the case back to the Delaware Chancery court.
"Both Cooper and Apollo will return to the Chancery Court for resolution of the remaining issues in the case," the company said in a statement issued to Reuters on Tuesday.
"Cooper believes Apollo has breached the merger agreement and we will continue to pursue our legal options as we work to protect the interests of our company and our stockholders."
A new ruling would have to be issued by Dec. 31, when the merger agreement allows Apollo to walk away.
The Indian company now has the option of walking away from the deal or renegotiating the transaction terms with Cooper if the U.S. company agrees to such a move, two sources with knowledge of the process said.
APOLLO SHARES RISE
Apollo stock rose as much as 8.7 percent on Tuesday to 92.15 rupees, a level last seen before the deal was announced in June, as investors bet on the Indian company dropping its pursuit to acquire Cooper. It ended the day up 2 percent in a weak market.
Shares of Apollo lost a third of their value in just two days after the deal was announced as investors fretted over the fully debt-funded acquisition of Cooper, which was nearly three times the Indian company's market value at that time.
Cooper shares fell 5 percent on Monday at $21.62.
Apollo has said it is committed to the takeover, but not at the current price, as issues including those involving Cooper's U.S. labour union - the United Steelworkers - and its Chinese joint venture made it difficult to close financing of the deal.
Cooper took Apollo to court in the United States over its failure to close the deal by Oct. 4. Apollo has argued the U.S. company is actually the one who has not kept up its end of the bargain.
As the Indian company sees it, Cooper is at fault because it has been locked out of its Chinese joint venture. Without information from the venture, the U.S. company failed to report its financial data as required for Apollo to get financing.
Cooper has argued that the Chinese lock-out and labor problems would never have happened without the merger agreement. Risks associated with the deal were taken on by Apollo and should have been baked into its bid, according to Cooper.
The cases are Cooper Tire & Rubber Co v. Apollo (Mauritius) Holdings Pvt, CA8980, Delaware Chancery Court (Wilmington) and 624-2013, Supreme Court of Delaware (Dover).
(Additional reporting by Varun Aggarwal in BANGALORE and Abhishek Vishnoi in MUMBAI; Editing by Stephen Coates and Matt Driskill)