Fate of Kumho Tire sale is still up in the air

Final approval of the sale of Kumho Tire continues to be pushed back as creditors continue to mull an offer by a consortium backed by Kumho Asiana Group Chairman Park Sam-koo for the country’s second-largest tire company.

Woori Bank, which has a 33.7 percent stake in the company, was expected to make a decision Monday, which was delayed by a day. It is not certain that Woori Bank will come to a conclusion today.

Park needs 75 percent approval from creditors in order to buy back the company he lost in 2010.

Park is confident because he has secured financing of 1 trillion won ($8.9 billion). He has argued that he should be given the same chance as his Chinese competition, Doublestar.

Korea Development Bank, which owns a 32.2 percent stake in the tire company, signed an agreement with Chinese tire company Doublestar in January to sell a 42.01 percent stake - including shares held by others - for 955 billion won.

KDB maintains that the Kumho Asiana Group chairman’s right to buy back the company is only limited to himself alone and doesn’t apply to a consortium with other investors.

Park has been supported by Korean presidential hopefuls including front runner Moon Jae-in, who has raised concerns about selling a top Korean company to a Chinese manufacturer.

Kumho Tire is a major supplier of tires to the Korean military.

Additionally there is a history of Chinese companies acquiring Korean companies and failing to live up to promises.

One of such cases was Shanghai Automotive Group buying Korean SUV manufacturer Ssangyong Motor in 2004 but pulling out without making a promised 1.2 trillion won investment.

Doublestar tried to downplay such concerns by releasing a statement a week ago that it will maintain all jobs at the company after the acquisition and contribute to the local economy by recruiting talent.

It also promised the Korean company independent management.

“We believe Park will be able to reacquire Kumho Tire as the price proposed by Doublestar is much lower than the expected range to be offered by Park after securing the necessary finance,” said Kim Jin-woo, an analyst at Korea Investment & Securities.

Some analysts say that the creditors may face lawsuits if they side with Park.

“If the creditors agree to accept Park’s proposal, Doublestar may file an international lawsuit against the KDB,” said a market insider.

On the flip side, if creditors reject Park’s proposal, then Park may file a lawsuit in a local court, and a legal fight over the company may drag on.

Even if Park acquires the company, he could face obstacles including improving the soured relationship between management and the company’s labor union.

“Labor costs rose even though the company’s profits dropped,” said the Korea Investment & Securities analyst Kim. “And it appears that stabilizing the management structure will remain troublesome unless they solve this issue.”

BY KIM YOUNG-NAM, CHOI HYUNG-JO [kim.youngnam@joongang.co.kr]