The sale of a controlling interest in Kumho Tires may or may not happen. The group of investment banks that own a 42 percent share of Kumho Tire voting stock decided last year they wanted to sell this share.
This began a flurry of rumors regarding who was and wasn’t bidding. Continental, Michelin and several Chinese firms have all been spoken about as bidders. In November there was a leak that a preferred bidder had been settled on. Qingdao Doublestar Tyre Co.’s bid may have been all for nothing. Traction News reached out to Kumho Tire about this recently.
Let’s go back to 2010 and set the scene
In 2010 a group of investment banks got together and restructured the whole Kumho conglomerate due to outstanding debt. Kumho Asiana Group had gone on a buying spree of foreign companies such as Daewoo Engineering and Construction and Korea Express. Creditors mostly involved in the Daewoo deal made a large cash call in 2010 that Kumho could not meet, causing Kumho’s investors to seek a restructuring to help the company get out from under some of its debt.
Korea Development Bank (KDB) is one of the majority creditors of Kumho Asiana Group, the holding company that owns Kumho Tires. Control of Daewoo Engineering and Construction was transferred to the bank as a result of that large cash call. Now KDB appears to want out from under the rest of the debt they acquired. Other banks with interest in Kumho include KB Kookmin Bank with a 9.9 percent share and Woori Bank with a 33.7 percent share in the 42 percent ownership of Kumho. The rest is split up in smaller shares held by a number of other creditors.
Early serious bids
Several companies/groups made “serious bids” when the sale of Kumho was announced in the middle of 2016. Shanghai Aerospace Industry Co., Jiangsu GPRO and Qingdao Doublestar Tyre Co. were among the bidders. It came out after a recent meeting of Kumho’s creditors that Shanghai’s bid was the highest but that Doublestar’s bid had been chosen as the preferred one by the banking groups.
Although the Chinese government tightened the reins on Chinese companies acquiring foreign companies, Doublestar was able to form an equity fund to come up with the cash for the purchase. Their offer is said to be one trillion won (about US$857 million).
Group chairman could stop deal
It looks like the creditor group and Kumho Asiana shareholders are going to approve the deal. However, it still may not happen — even if the shareholders approve it. Kumho Asiana Group’s chairman, Park Sam-Koo, has two options that could block the sale to Doublestar.
The first is to simply block the purchase because he doesn’t like the terms. That said, he has already refused a previous sale and implied that he would never use his blanket refusal powers again. The belief is that he won’t use that right in this case.
His other option is to buy it himself. Park has the option to purchase the 42 percent share in the company at the same terms as the winning bidder. Park has expressed interest in doing just this, but has so far apparently run up against stumbling blocks putting that kind of money together. However, he still has plenty of time and is rumoured to have a strong desire to purchase the outstanding shares.
And here’s what Kumho Tires USA had to say
Traction News reached out to Kumho with a list of questions about their current financial situation. A spokeswoman replied that, at this time, the local firm had to decline to comment beyond the following statement:
“Regardless of the sale of Kumho Tire, the process, production and supply of Kumho Tire is operating normally. Our Chairman has expressed strong will for the acquisition and will take action. As always, Kumho Tire is fully committed to their customers and the best quality in production.
We’ll keep you up-to-date with developments in the sale of Kumho as they occur.”