Kumho likely to be sold to China’s Doublestar

kumho-tires-logoIn what is said to be the largest M&A deal this year, the creditors of Kumho Tire Co. are expected to pick China’s Doublestar Tyre Co. as the preferential bidder for South Korea’s second largest tyre maker.

Three Chinese companies had formally offered to buy a controlling stake in Kumho and these were Doublestar Co., Shanghai Aerospace Industry Co. and Jiangsu GPRO Group Co.

The Korea Development Bank (KDB) and eight other creditors of Kumho are seeking to sell a 42% stake in the company.

Doublestar, which has formed a private equity fund for the bid, is known to have offered around 1 trillion won (US$844 million).

All eyes are also now on how Kumho Asiana Group Chairman Park Sam-koo will handle deal or buy back the tyre maker seen as a key to his attempt to rebuilding his business empire.

Park has the right of first refusal, which gives him the priority to repurchase management control under the same terms with any highest bidder.

Kumho Tire was placed under a creditor-led workout programme in 2010, with its parent Kumho Asiana Group hit hard by a liquidity crunch from the takeover of Daewoo Engineering and Construction Co.

Kumho Tire’s market capitalisation is some 1.4 trillion won (US$1.2 billion), with the stake on sale valued at about 590 billion won, which includes management premiums.

Kumho Tire has four manufacturing facilities abroad in China, Vietnam and the US. In 2015, the firm made 3.04 trillion won in sales, and its operating profit was 39.1 billion won.