Creditors strive to keep Kumho Tire deal alive

Use of the Kumho brand name was certainly a factor motivating Qingdao Doublestar Tire’s bid for a share in the Korean tyre maker. Although selected as the winning bidder, uncertainty now hangs over the terms under which the Chinese manufacturer can use the Kumho name, and this may suffice for Doublestar to walk away from the deal. Kumho Tire’s creditors are attempting to broker a compromise.

According to Pulse by Maeil Business News Korea, Kumho Tire’s main creditor, Korea Development Bank (KDB) reported yesterday that Doublestar has rejected Kumho’s terms for use of the brand name and may quit the deal to acquire a 42.01 per cent stake in Kumho Tire; the royalty fees it is now expected to pay are more than double those agreed upon with creditors before its selection as preferred bidder.

KDB believes that Kumho Industrial is now demanding royalties equal to 0.5 per cent of annual sales instead of the previously-agreed 0.2 per cent, and an agreement of 20 years’ duration instead of five, in order to block the Doublestar acquisition. Park Sam-koo, chairman of the Kumho Asiana Group and foiled Kumho Tire acquisition hopeful, is chief executive of Kumho Industrial. Under the new terms, the Chinese company would have to pay Kumho KRW 150 billion (£104.4 million) a year over the next two decades.

Kumho Tire’s creditors have requested that Park respects their original terms and indicates his intention to do so by Friday 16 June.