Park Sam-koo, chairman of the Kumho Asiana Group, decided to accept a proposal by the Korea Development Bank (KDB) in connection with a contract for the use of Kumho Tire trademarks with Doublestar of China. This means that chairman Park will take control of Kumho Tire through a primary right to buy which is expected to revive due to Doublestar’s price adjustment demand rather than breaking the ongoing deal.
According to the Kumho Asiana Group on September 1, Kumho Industrial sent an official letter with this message to the KDB. By doing so, the Kumho Asiana Group withdraw conditions for accessing accounting books restricting the trademark in areas which Kumho Tire did not enter, while agreeing to a trademark contract draft proposed by the KDB on August 30.
Kumho Industrial also proposed to the creditors that they hold a working-level meeting to conclude a mutually beneficial trademark use contract in the letter. In a recent proposal made by the KDB, the rate of trademark use is 0.5% of sales and the period of use is 20 years. "When Kumho Industrial sends us a reinsurance plan, we will clarify our position after a legal review," said an official at the company.
Kumho Industrial’s decisive acceptance of the trademark right proposal by the KDB stamped out the biggest stumbling block in the sale process, which creditors and Doublestar are working on, has disappeared. The remaining part is a price cut negotiation. Doublestar demanded a cut in the price of Kumho Tire from 950 billion won (US$855 million) to 800 billion won (US$720 million) due to deteriorating earnings and a rise in unexpected cost.
If both parties agree and conclude a new stock purchase agreement (SPA) based on the reduced price, Park will be able to exercise his primary right to buy. Unlike last March, the KDB is poised to allow chairman Park to form a consortium to exercise the right by organizing a consortium. In addition, it is expected that the KDB’s preserving 270 billion won (US$243 million) for Doublestar’s trademark burden will be also applied to a consortium to be formed by chairman Park. In the end, if the consortium attracts about 530 billion won (US$477 million) in fund, chairman Park will be able to retake Kumho Tire.