The latest development in the negotiations to sell a stake in Kumho Tire is that potential buyer Qingdao Doublestar Tire probably won’t, after handing over KRW 955 billion (£653.6 million) for the 42.01 per cent controlling share, be permitted to use the Kumho name.
Park Sam-koo won’t exercise his right of first refusal to acquire a stake in Kumho Tire. The Kumho Asiana Group chairman has described the Korea Development Bank’s decision to prevent him from funding the acquisition through formation of a consortium as “unfair,” and as a result Kumho Asiana has opted against participating in the sale of the 42.01 per cent shareholding.
The latest CRIA data, which was released by Chinese tyre industry association CRIA on 12 April, shows that Zhongce Rubber Group (also known as ZC Rubber) remains the number tyre manufacturer in China in terms of income, with 2016 sales of 18.38 billion yuan (RMB). Giti Tire’s Chinese operation (Giti Tire [China] Investment Co., Ltd.) trails by more than 6 billion yuan, but is a clear second place with 13.14 billion yuan in 2016 ahead of Sailun Jinyu Group, which reported income of 11.19 billion yuan last year.
Park Sam-koo reportedly possesses the funds needed to buy back a controlling stake in Kumho Tire. The chairman of the Kumho Asiana Group has raised almost KRW 1 trillion (£695 million) to acquire the 42.1 per cent share in Kumho Tire currently held by the Korea Development Bank and other creditors. The funds have been borrowed from financial investors and associates.
Using information received from industry sources, the Yonhap News Agency reported today that Kumho Tire’s creditors are expected to select Doublestar Tyre as the preferred bidder for the 42.01 per cent share in the Korean tyre maker. Yonhap wrote that Doublestar “received the highest score in the evaluation of price offer and other terms” in the round of bidding that closed last week. Doublestar is said to have submitted a bid of around Krw 1 trillion (£692.9 million).
Final bids to acquire a 42.01 per cent shareholding in Kumho Tire are in, and Credit Cuisse, who has managed the deal, has requested additional time in order to review the bidders’ documents. Pulse, Maeil Business Newspaper’s English-language website, posits that the preferred bidder will be picked between 16 and 18 January, and the terms then sent to Kumho Asiana chairman Park Sam-koo.
A final round of bids for the 42.01 per cent controlling stake in Kumho Tire will be held on 12 January, and according to the Korea Development Bank and other creditors, a shortlist of five preferred bidders are in the running to acquire this share should chairman Park Sam-koo decline a prior offer to match the highest bid and purchase the 42.01 per cent stake himself. The five contenders are Apollo Tyres, Shanghai Aerospace Industry Corp. (SAIC), Jiangsu GPRO Group, Shandong Linglong Tire and Doublestar Tyre.
Qingdao, China-based Doublestar Tire recently announced that it has launched an aramid-reinforced puncture-sealing passenger car tyre under the Crossleader brand.
Qingdao Doublestar’s machinery division is a regular exhibitor at the RubberTech exhibition in Shanghai and the 2016 edition was no different for the factory equipment supplier. However, while the Reifen China exhibition was taking place in the neighbouring hall to RubberTech, Doublestar’s tyre manufacturing operation was hosting its “PCR Tire Industry 4.0 Intelligent Factory Completion & Safe Tire Global Strategy Conference” on 3 December in Qingdao, Shandong Province.
Following the implementation of US import tariffs in the last year (car tyres 2015; truck tyres 2016) and the widespread recognition of vast oversupply in the Chinese manufacturing base, there has been talk of consolidation of tyre industry in the People’s Republic for some time.
In the last few weeks however, it has become apparent that several Dongying, Shandong-based tyre manufacturers (especially those found in the Gungrao district) have experienced serious difficulties resulting in bankruptcies, buyouts and mergers. Now the consolidation trend appears to be gathering speed.
Deruibao Tire was the first to go pop more than a year ago, taking the private brand orders of some well-known wholesalers and importers with it, before its assets were taken on by fast-growing Qingdao Doublestar in what some characterised as a shotgun wedding, but was also a sign of things to come. Several local Chinese news sources named Dongying-based Hengyu Tire as the next to go (with the latter apparently declaring bankruptcy on 14 February), followed by the smaller and younger O’Green and Watson Tyre factories.
At the same time, various Chinese tyre distributors report that Yongtai Chemical’s tyre operations have shut down. Company representatives were not available for comment. However, we do know that Yongtai-owned Covpress (a Coventry-based panel metal supplier to well-known OEMs including Jaguar Land Rover) has entered administration. And furthermore, DMack – which had made itself popular selling World Rally Championship tyres made at Yongtai Chemical – switched production of its tarmac competition tyres to Cooper Tire Europe’s Avon Motorsport division in Melksham in mid-August (see “Yongtai Chemical-owned Covpress in administration” for further details).
On 22 September 2016 Doublestar Europe Ltd was registered as a UK company based in London. Tyres & Accessories understands that the company is a joint venture between Zenises and growing Chinese tyremaker Qingdao Doublestar designed to bring Chinese products into European markets.
Further to Tyres & Accessories’ detailed report on Qingdao Doublestar Tire Corp’s expansion plans last week, the company has released further information about the truck and OTR tyre joint venture it is setting up in Kazakhstan.
Qingdao Doublestar Rubber and Plastics Machinery Co. Ltd., the sister company of tyre manufacturer Qingdao Doublestar, has expanded its cooperation with well-known German tyre manufacturing equipment manufacturer HF TireTech Group.
Things are tough in China, but not every company is going under. While some are struggling others are expanding quickly. During the course of the recent Reifen China exhibition in Shanghai, Tyres & Accessories spoke with Qingdao Doublestar representatives and found our more about the company’s ambitious plans for rapid change despite the turbulent market conditions.
A couple of months ago we discussed the “restructuring” of relatively large and modern Chinese manufacturer Deruibao Tire. Back then, Qingdao Doublestar was top of the list of firms connected with an acquisition/cooperation/merger rescue orchestrated by the local government. A month later government-owned ChemChina announced that it was buying Pirelli. This latter point has been covered in some depth in the pages of Tyres & Accessories, especially in our April edition. The Pirelli/ChemChina story will no-doubt garner more attention as the very complex outworkings of the deal are walked out, but what remains of interest is the way in which both the local Chinese market and the global industry are engaged in a period of both parallel and inter-connected consolidation.
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