Kumho creditors agree to negotiate

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Kumho creditors agree to negotiate

The chance for Chairman Park Sam-koo to secure his governance of Kumho Asiana Group has strengthened as the creditors of Kumho Industrial have agreed to negotiate on selling him the company.

Kumho Industrial is the de facto holding company of the group. It also owns a 30 percent stake in its flagship, Asiana Airlines, which is Korea’s second-largest carrier.

According to financial institutions on Monday, the creditors of Kumho Industrial, led by the state-run Korea Development Bank (KDB), decided to directly negotiate with Park. The move came after 98 percent of the creditors, who own a 57.54 percent stake in the company, agreed to the plan.

In late April, the creditors tried to sell the company via a bidding process. Hoban Construction reportedly offered 600.7 billion won ($560.4 million) as the only bidder, but the creditors turned down the offer as they felt the price was too low.

Creditors said at the time that they would organize a second bidding, but industry insiders predicted that the Kumho Group chairman would eventually repurchase the company he was forced to give up because finding a new buyer would be difficult as it has such a high price tag. The company was estimated to be worth between 600 billion won ($561 million) and 1 trillion won.

The next part of the procedure for the creditors is to evaluate the current value of Kumho Industrial. Samil PricewaterhouseCoopers and Deloitte Korea have been hired to conduct the process.

Owning Kumho Industrial grants governance of Asiana Airlines and other Kumho affiliates, including Asiana IDT, of which Kumho Industrial owns a 100 percent stake. The final value will therefore be calculated by taking this into account.

The negotiations will likely start from July. Park is expected to acquire the company in August if the two sides agree on the outcome. If the chairman doesn’t agree to the price proposed by the creditors, they can adjust it one more time. If Park also turns down that offer, the creditors can start negotiations with another potential buyer for the same price within the next six months.

But industry insiders say it won’t be that easy for Park to reclaim the company as there is a large gap between what he wants to pay and what the creditors will accept.

“I expect the creditors to offer a reasonable price because there already was a price seen by the market,” Park said at an economic forum.

According to sources in the industry, Park thinks around 600 billion won is reasonable for the sale - a similar amount to what Hoban Construction proposed.

Yet the creditors have still decided to negotiate with the chairman as it will be almost impossible to find a buyer who could offer 1 trillion won.

How Park will provide the necessary money is also being questioned. However, he recently told reporters that he feels positive about attracting investors for the purchase.

Park controls a 10.15 percent combined stake in Kumho Industrial, including the 5 percent owned by his son and Kumho Tire Vice President Park Se-chang. He needs 40 percent to regain control of the company.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]
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