Cooper Tire and Rubber Co shareholders will likely approve on Monday the U.S. company's $2.5 billion sale to India's Apollo Tyres , in a transaction that is expected to create the world's seventh-largest tyre maker.

A green light from Cooper shareholders will bring Apollo one step closer to completing the takeover, although hurdles still remain due to opposition from workers at Cooper's joint venture in China and U.S. labour issues which could delay the deal.

Shareholders stand to receive $35 per Cooper share, a premium of more than 40 percent to its price before the acquisition announcement.

"Because this is an all cash deal with a substantial premium to the pre-deal price the vast majority of shareholders will support this deal at this price," said Chris DeMuth Jr, portfolio manager at U.S.-based Rangeley Capital.

Still, Cooper shares have lost nearly 12 percent after rising close to the offer price, as roadblocks to the acquisition emerged due to worries over the debt burden of the new owner.

"You're putting pressure on the company by the amount of debt that they want to use to buy this. And so I think the market will always be skittish in the situation," DeMuth said. Rangeley Capital owns less than 5 percent in Cooper, he said.

Workers at Cooper's China joint venture, Cooper Chengshan Tire Co in China's eastern Shandong province, have been striking against the deal for about three months, while its local partner has filed a lawsuit, seeking to dissolve the business arrangement.

Separately, a U.S. arbitrator ruled Cooper cannot sell two of its factories in the country until a collective bargaining agreement is reached between Apollo and members of the plants' union.

The two companies have said they hope the deal will get the final all-clear by the end of the year.

Apollo plans to fund the acquisition entirely through debt, most of which will be raised through Cooper, whose market value is currently nearly four times that of the Indian company.

Apollo, whose shares have lost a quarter of their value since the deal was made public, hopes to gain a foothold in the world's two biggest auto markets - China and the United States - by buying Cooper.

If completed, the deal would be the second-largest U.S. acquisition by an Indian company and one of the top 10 outbound takeovers from Asia's third-largest economy, according to Thomson Reuters data.

A shareholder approval of the deal also means Apollo can start drawing down loans, which are already committed by banks, according to a source with direct knowledge of the matter.

Apollo declined comment on Monday, while Cooper did not immediately respond to an email seeking comment outside U.S. business hours.

The banks financing the deal include Standard Chartered and Morgan Stanley .

(Reporting by Aradhana Aravindan in MUMBAI and Mridhula Raghavan in BANGALORE; Additional reporting by Sumeet Chatterjee; Editing by Jeremy Laurence)