Chinese look to buy Kumho Tire
The three bidders, all tire companies based in China, are gunning for a 42.01 percent stake in Kumho Tire currently held by its creditors, which include Woori Bank and Korea Development Bank, industry sources and creditors said Thursday.
There were five preliminary bidders. Double Star Tyres, Shanghai Aerospace Industry and Jiangsu GPRO Group participated in the main bid on Thursday. China’s Linglong Tire and India’s Apollo Tyres withdrew.
The final decision now comes down to whether Kumho Asiana Group’s chairman, Park Sam-koo, exercises his right of first refusal, which gives him the option to enter a business transaction with the owner of the stake, in this case Kumho Tire’s creditors, before anyone else.
Kumho Asiana Group lost control of Kumho Tire and Kumho Industrial after both affiliates filed for a debt workout program in 2009. The group had suffered a severe liquidity crunch after purchasing Daewoo Engineering and Construction. In 2010, creditor banks bought 42.01 percent of Kumho Tire through a debt-equity swap.
Among the three companies that participated in Thursday’s bid, the preferred bidder will likely be announced today, a source from Korea Development Bank said. Park then has one month to decide whether to exercise his right of first refusal. If he does, he must agree to pay the highest bid price.
While the market price of the stake on sale is valued at roughly 600 billion won ($500.3 million), the price is expected to jump to as high as 1 trillion won considering management premiums.
Park has expressed a strong will to acquire Kumho Tire. “Acquiring Kumho Tire to finalize rebuilding of the group remains our homework,” he said in a New Year’s message delivered last Monday.
Financing remains a major obstacle for Park, as his personal assets fall short of the expected bid price. Creditors banned Park from financing through both group affiliates and transferring his right to a third party.
Based on Park’s previous remarks, his likely move will be establishing a special-purpose corporation wholly owned by himself and attracting investors so he can acquire Kumho Tire through the corporation. He has said last year that “it is difficult to acquire Kumho Tire alone” and added, “I will be acquiring it together with strategic investors or financial investors.”
Park managed to reacquire Kumho Industrial in 2015, but the fate of Kumho Tire remains uncertain. The chairman is already under huge financial burden from the roughly 600 billion won he borrowed to acquire Kumho Industrial.
The most preferred scenario for Park would be for the bid price be set as low as possible, but the creditor banks may reject the proposed bid, or even halt the sales process and reopen the bid later, if the bid price proves insufficient.
“We are open to all chances and will consider the bid price to make up our minds,” a spokesperson from Korea Development Bank said. “But even if we reject the proposed bid, we are not considering at all an option to ink a private contract with Chairman Park.”
BY KIM JEE-HEE [email@example.com]
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