Attractive M&A Target
The Kumho Tire creditors including the Korea Development Bank (KDB) and Woori Bank posted a public notice of sale on September 20 via Credit Suisse Securities. At present, the creditors own 42.01%, 66,368,844 shares, of Kumho Tire with Woori Bank and the KDB representing 14.15% and 13.51%, respectively. The total value is approximately 750 billion won (US$672 million) and the final selling price is estimated at one trillion won (US$895 million) or so.
The creditors are planning to send investment prospectuses to about 60 potential investors before the preliminary bidding scheduled for early November and selection of preferred bidders scheduled for January next year. Kumho Tire is regarded as a very attractive M&A target in that it has manufacturing facilities in China with the Chinese government restricting the construction of new factories in the country. This is why a number of foreign investors are highly interested in the deal. According to industry sources, the most promising candidates include local and foreign private equity funds (PEFs), Kumho Asiana Group chairman Park Sam-koo and foreign tire manufacturers such as Bridgestone, Michelin and Yokohama Tire.
One of the most interesting parts is whether the chairman will be able to regain the company. On his part, Kumho Tire is essential for the reconstruction of the group. Still, the chairman cannot participate in the bidding. He can exercise the right of first refusal after the bidding in January though. The higher the acquisition price becomes, the more difficult it becomes for him to regain it.
The right of first refusal cannot be given to a third party, meaning the chairman has to acquire the company as an individual. However, he already has a debt of approximately 500 billion won (US$447 million) for the acquisition of Kumho Industrial. This is why some doubt that he will be able to prepare one trillion won or so as an individual and are predicting that he will take part in the bidding after forming a consortium with a PEF, a foreign strategic investor or the like without exercising the right. Many in the industry are forecasting that the chairman will succeed in acquiring the company in any way.
In the meantime, the Kumho Tire labor union announced on September 20 that it is not opposed to international acquisition as long as employment is ensured and the acquirer discloses detailed information with a responsible attitude during the course of the sale. It added that it will not be opposed to acquisition by the chairman as well if the positions of employees are guaranteed.