Doublestar and Kumho’s horizontal competition resolution postponed

Recently, the tyre manufacturer Qingdao Doublestar received the “Commitment on Delaying the Resolution of Horizontal Competition” from the controlling shareholder Doublestar Group. Doublestar Group stated that “it is not yet ripe for solving horizontal competition through asset injection, which is not conducive to the rights and interests of Qingdao Doublestar, and there is great uncertainty”. It is reported that Doublestar Group has decided to extend the fulfilment period of the original commitment for three years to July 5, 2026. Tyrepress China learned that the Doublestar Group also mentioned that it is “looking for other solutions that are more conducive to solving horizontal competition and can promote the development of Qingdao Doublestar”.

In 2018, Doublestar Group acquired a 45% stake in Kumho and became the controlling shareholder of the Korean tyre maker. It is worth noting that the funding for acquiring Kumho did not come from tyre manufacturer Qingdao Doublestar but was co-financed by “Doublestar Group and others”. Doublestar Group believes that such an investment method can alleviate the financial pressure on Qingdao Doublestar and make the funds of Qingdao Doublestar more effective.

At that time, Doublestar Group promised to eliminate the horizontal competition between Kumho and Qingdao Doublestar through methods including but not limited to asset injection within five years. But Doublestar Group extended the commitment when the five-year deadline was approaching.

Tyrepress China has learned that Doublestar regards Kumho’s loss in 2022 as an essential reason for failing to resolve horizontal competition. Qingdao Doublestar announced on the Shenzhen Stock Exchange on June 6 that “(Kumho) has not yet achieved a sustained and stable profit status, and its performance fluctuations after the asset injection will significantly impact Qingdao Doublestar’s performance. Therefore, it is not yet ripe to start asset injection.” In other words, the Doublestar Group was afraid that Kumho’s performance would drag down Qingdao Doublestar, so it did not dare to merge the financial statements of the two parties. In 2022, Qingdao Doublestar operated as an independent tyre manufacturer, losing 600 million yuan.

At the same time, Qingdao Doublestar’s announcement mentioned that Doublestar Group had discussed the feasibility of solving horizontal competition in other ways, but there are difficulties.

Doublestar Group stated that in the next three years, it will “actively promote Kumho to improve its profitability and enhance the recognition of the capital market to meet the relevant requirements for asset injection as soon as possible.” Suppose the asset injection cannot be completed after three years. In that case, Doublestar Group will refer to market practices and choose other legal and compliant methods (such as asset disposal to third parties and other methods approved by regulatory agencies) to resolve horizontal competition within one year after the expiration.