Delayed Deal

Doublestar is said to try to acquire Kumho Tire at a lower price by breaking the current deal and bidding again.
Doublestar is said to try to acquire Kumho Tire at a lower price by breaking the current deal and bidding again.

 

It has been found that Kumho Tire creditors recently sent a message to Doublestar Tyre in order to call on the Chinese tire manufacturer to stick to their stock purchase agreement (SPA). “It seems that Doublestar is trying to acquire Kumho Tire at a lower price by breaking the current deal and bidding again,” one of the creditors explained.

At present, the Korea Development Bank (KDB), which is the secretary of the creditor group, is putting pressure on Kumho Asiana Group chairman Park Sam-koo by mentioning receivership and so on. This is to prevent the deal from being broken, too. In a case where the chairman does not allow the use of Kumho’s trademark rights, Doublestar can withdraw from the process for the reason that a precondition for the acquisition has not been satisfied. Then, the disposal of Kumho Tire has to be restarted from the beginning and the KDB is likely to be held accountable. This is why the bank is trying to maintain the deal by sending the message to Doublestar and putting pressure on the chairman.

The value of Kumho Tire has dropped due to the conflict between the KDB and the chairman. For example, its stock price has dropped from more than 9,000 won (US$8.1) to approximately 7,000 won (US$6.3) per share between January this year and this month. Under the circumstances, Doublestar is considering the acquisition price it suggested earlier as an unreasonable one. Most of the money the Chinese company is planning to spend to take over Kumho Tire is from the outside and, as such, a lower acquisition price based on re-bidding can result in a smaller financial burden on the part of the Chinese manufacturer.

According to the SPA signed by the creditors and Doublestar, the sale can be cancelled without any penalty if they fail to reach an agreement on preconditions within five months. According to industry sources, their negotiations are likely to be stopped once the chairman expresses his opinion on June 9 not to cooperate for the use of the trademark rights. KDB chairman Lee Dong-gul recently said that the creditors would adhere to their principle and make a significant decision in that case.

 

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