Qingdao Doublestar Tire’s bid to acquire 42.01 per cent of South Korean tyre maker Kumho Tire is developing into a drama of the sort not witnessed since a stubborn Cooper Chengshan Tire helped derail Apollo Tyres’ purchase of Cooper Tire & Rubber. Business Korea writes today that 41 Kumho Tire executives, including chief executive officer Lee Han-seob, intend to resign should Kumho Tire’s creditors sell the share to Doublestar.
The unflattering evaluation Korea Development Bank (KDB) gave Kumho Tire on 7 July has ruffled feathers within the tyre maker’s management, and Kumho Tire intends to take legal action against what it considers a rating artificially given to achieve a specific purpose.
It’s more than two months since Qingdao Doublestar Tire was named the preferred bidder to acquire a 42.01 per cent share in Kumho Tire, yet a satisfactory agreement remains elusive. The most contentious point has been the use of the Kumho brand name, with rightsholder Kumho Industrial demanding 0.5 per cent of Kumho Tire’s revenues for 20 years for use of the name – significantly more than the 0.2 per cent for five years as previously agreed between Doublestar Tire and Kumho Tire’s creditors.
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.
Moon Jae-in is South Korea’s new President, and this may be bad news for Qingdao Doublestar and its efforts to acquire a controlling share in Kumho Tire. In an article published earlier today, The Korea Times explored the possibility that Moon may prevent the Chinese tyre maker from acquiring Doublestar. According to the financial daily, analysts consider this a very real threat to the deal.
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.
Although Park Sam-koo is said to have arranged sufficient funds to buy back a share in Kumho Tire from its creditors, some still doubt the transaction will go ahead. The Investor, the online business news service run by The Korea Herald, comments that many observers question whether Park will be able to pay the KRW 100 billion (£70.5 million) down payment for the deal.
Kumho Tire Europe has issued a statement regarding Peter Becker’s intention to leave the company. Becker will reportedly part ways with Kumho at his own request this summer; the tyre maker says specific details regarding his future career plans are “not known at the moment.”
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.
Kumho Tire’s sponsorship of German football club FC Schalke 04 has been extended until 30 June 2018. The tyre maker and Bundesliga protagonist first announced their collaboration at the beginning of 2015, and since then Kumho has been represented on LED signage at the club’s home stadium, Veltins Arena, and utilised other advertising options both in the stadium and in team-related publications. These advertising opportunities continue under the extended deal.
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.
The Shanghai Aerospace Industry Co., or SAIC, is said to have submitted the highest bid for Kumho Tire in the preliminary auction. According to Maeil Business News Korea’s Pulse website, the value of the SAIC bid hasn’t been disclosed, however “market experts” recently estimated that bidding for Kumho Tire could reach as high as KRW 1 trillion (£685.8 million).
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