China's Doublestar to Buy Kumho Tire Stake in $830 Million Deal

  • Qindao Doublestar would own 42 percent of Korean tiremaker
  • Deal would make Doublestar largest tiremaker in China

China’s Qingdao Doublestar Co. said it has signed an agreement with Kumho Tire creditors to buy a 42 percent stake in the South Korean tiremaker in a deal that could enable Doublestar to further expand in China.

The deal, worth 955 billion won, or about $830 million, could help turn Doublestar into China’s largest tiremaker if it can fend off a potential counter bid from Kumho Tires’ chairman, who has said he wants to put together a consortium of investors to buy back the stake.

Just hours before the Doublestar deal was announced, Kumho Asiana Group said in a statement that its chairman Park Sam-koo would give up the right of first refusal if his request to buy the Kumho Tire stake is allowed. Park is in talks with several strategic investors including a Chinese company, said Yun Byung-chul, Kumho Asiana Group’s chief financial officer.

“We are not opposing Doublestar because it is a Chinese company,” Yun said in a briefing in Seoul, referring to claims by South Korea that China has been retaliating against Korean companies for the country’s decision to allow the U.S. to deploy a missile defense system on the Korean peninsula. “Considering various aspects of business management that we’ve done for about six decades, we expect there is more synergy with our buyout rather than a takeover by a foreign company,” he added.

A spokesman at Korea Development Bank, one of the creditors leading the stake sale, said its stance against Park making a bid has not changed.

Kumho Asiana Group put Kumho Tire and Kumho Industrial Co. under a debt restructuring plan in December 2009. Creditors including state-owned Korea Development Bank and Woori Bank reached an agreement to convert debt to equity in 2010 and hold a total of 42 percent of shares in Kumho Tire.

Doublestar’s bid comes at a time when Chinese auto parts makers are buying U.S. parts makers at a record pace. The Korean tiremaker, whose North American sales account for about 22 percent of sales, opened its first U.S. manufacturing plant in Macon, Georgia, in May 2016, with an annual capacity of 4 million tires.

Doublestar said it expects to be among top 10 global tiremakers with the Kumho Tire stake purchase.

“China is the key for Kumho Tire to break through difficulties that the company is facing as 40 percent of Kumho Tire’s manufacturing capability is based in China,” Doublestar said in an emailed statement. “Doublestar can help Kumho Tire to improve financial and operational hardships, and ultimately to achieve higher growth.”

Under the deal, Doublestar would purchase 66.4 million shares for 955 billion won, or at about 14,390 won per share. That would be about 75 percent higher than Kumho Tire’s closing share price of 8,220 won on Friday. Kumho Tire rose nearly 7 percent in Seoul on Monday, biggest gain since September.

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