Bidders for Kumho Tire
The number of bidders for Kumho Tire Co., South Korea’s second-largest tire maker and a capital chance in the merger and acquisition (M&A) market this year, was narrowed down to three, and all eyes are now on how Kumho Asiana Group Chairman Park Sam-koo will deal with China’s huge capital. Market watchers say that the sale price of Kumho Tire will exceed 1 trillion won (US$847.82 million).
According to investment banking industry sources on January 12, three Chinese companies have offered to buy a 42.01 percent stake in Kumho Tire currently held by its creditors. They are Qingdao Doublestar Tire Co., Shanghai Aerospace Industry Co. (SAI) and Jiangsu GPRO Group Co.
Industry experts believe that Doublestar Tire and SAI are two big players in the bidding. Doublestar is said that it has formed a private equity fund worth more than 1.4 trillion won (US$1.19 billion) to acquire Kumho Tire and made a some 1 trillion won (US$847.82 million) bid. SAI was the highest bidder which made a preliminary bid of 5.88 billion yuan (US$859.24 million or 990 billion won). Accordingly, the two Chinese firms are expected to battle out to acquire Kumho Tire.
Creditors are planning to set the selection standards of preferred bidder for Kumho Tire on the same day and choose a preferred bidder as early as the 13th. Considering Chairman Park’s right of first refusal, creditors will directly sign a stock purchase agreement (SPA) with the preferred bidder without a due diligence. If Park gives up his right of first refusal, the price will be adjusted by a small margin through a due diligence and the sale will be completed with the final price.
When a preferred bidder is selected on the 13th, creditors will ask whether Park will exercise his right of first refusal with the price specified in the SPA. Park then has one month to decide whether to exercise his right of first refusal as well as to submit his financing plans.
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. As creditors have allegedly come up with flexible standards that can see Park and the SPC in line, Park is likely to acquire Kumho Tire. An official from the market said, “Since there are limits on taking out loans in his individual capacity, the SPC is considered the most feasible plan. There are also rumors that Park will jointly acquire Kumho Tire with the state-owned China National Chemical Corp. (ChemChina), which participated in the preliminary bid.”
In this regard, Park didn't seem so worried. When Park was asked about the estimated bidding price, he said, “I’m not even interested in (the bidding price). I can proceed with it when (the preferred bidder) is decided.”