China’s Qingdao Doublestar Tire, the preferred bidder of Kumho Tire, made an official request to creditors to cut the sale price of Kumho Tire by 16 percent, or 155 billion won (US$137.45 million). The company seeks to buy Kumho Tire for 800 billion won (US$709.41 million).
According to the Korea Development Bank (KDB) on August 23, Kumho Tire’s creditors, including the KDB, Woori Bank and KB Kookmin Bank, held a shareholder meeting on the same day to discuss whether to accept Doublestar’s demand.
Doublestar signed a stock purchase agreement (SPA) for Kumho Tire with creditors in March. Under the contract, the Chinese tire maker can cancel the transaction if Kumho Tire's operating profit falls more than 15 percent by September 23, when the deal is to be finalized. Kumho Tire has contingent liabilities including the recent lawsuit between the management and labor union over ordinary wages. Instead of cancelling the SPA, Doublestar asked creditors to lower the sale price by 16 percent from 955 billion won (US$846.48 million) to 800 billion won (US$709.09 million) considering the risk of contingent liabilities, like operating loss. This is because the limit of compensations for contingent liabilities is 16.2 percent of the sale price under the SPA.
Creditors will decide whether to accept Doublestar’s request by the end of this week. Since they didn’t show difference in opinion on the issue at the meeting on July 23, creditors are highly likely to accept Doublestar’s demand to cut the sale price. In this case, the KDB will enter into a sales contract with Doublestar by the end of this month and Kumho Asiana Group Chairman Park Sam-koo can also join the bidding for Kumho Tire again. When the sale price changes, Park’s right of first refusal will be revived and he will be able to rebid the price.
The KDB is planning to ask Park to notify whether he will exercise his right of first refusal. Changing their stance in March, creditors will also allow Park to form a consortium to acquire Kumho Tire.