Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Talks over Kumho Tire break down
By Park Jae-hyuk
Negotiations between creditors of Kumho Tire and China’s Qingdao Double Star for the latter to acquire the Korean tire company have broken down, creditors said Tuesday.
This is because Kumho Tire’s creditors rejected Double Star’s demand to cut the acquisition price of the tire company for a controlling 42 percent stake.
The creditors said the mid-tier Chinese tire maker’s demand to lower the price from 955 billion won ($844 million) to 295 billion won was “unreasonable.”
Even if creditors decide to fully nullify the deal with Double Star, observers say Kumho Asiana Chairman Park Sam-koo would still be unable to revive his right to acquire the tire producer.
This is because the creditors are considering dismissing the chairman and depriving him of that right, citing his poor management.
The creditors led by the state-run Korea Development Bank (KDB) decided to send a de facto ultimatum to Double Star that the share purchase agreement will be cancelled unless the Chinese firm expresses its willingness to renegotiate with them about the price.
Double Star is expected to clarify its position by Friday next week.
The creditors have sought to sell Kumho Tire to Double Star as they thought it would be the best way to normalize the management of the Korean company.
In March, both sides initially agreed on the acquisition price of 955 billion won.
However, Double Star has been pressuring the creditors to cut the price by 155 billion won since July, citing Kumho Tire’s poor business performance.
The creditors then requested Double Star to promise job security for Kumho Tire employees for five years.
They also decided to cover 270 billion won for the use of Kumho Tire’s trademark, on behalf of Double Star.
Despite the preferential treatment, Double Star asked the creditors to cut the price by 235 billion won, if Kumho posts a poor results in the third quarter.
The demand has finally come to a de facto end of the negotiations.
The creditors plan to force Kumho Tire’s management to devise measures to save the company.
If the plans are inadequate for the normalization of the company, the creditors will dismiss Chairman Park and other executives.
Some say, however, the chairman may still be able to exercise his right of first refusal, if the creditors give public notice of a bid and sign a memorandum of understanding with other potential bidders.