Kumho chief eager to reacquire tire unit

By Lee Hyo-sik

Park Sam-koo, chairman of Kumho Asiana Group

Park Sam-koo, chairman of Kumho Asiana Group, looks desperate to buy back the group’s tire unit, a key missing piece of Korea’s former eighth-largest family-controlled conglomerate, according to industry analysts Tuesday.

However, he is expected to face a bumpy road ahead as he is short of money after already spending tens of billions of won to take back control of Kumho Industrial and increase his shares in other group units. In addition, global tire makers and private equity funds are reportedly showing interest in acquiring Kumho Tire.

Woori Bank, Korea Development Bank and other creditors, which hold a combined 42.1 percent stake in Korea’s second-largest tire maker, issued a sales notice, Tuesday, sending request for proposal (RFP) letters to nearly two dozen entities.

After receiving letters of intent, the creditors plan to select the highest bidder as their preferred bidder as early as January.

If Park, who has a prior stock purchase right, is willing to pay the highest bidding price, he will take back control of Kumho Tire. But the tire maker will be sold to the highest bidder if he doesn’t.

Given Kumho Tire’s share price hovering around at 11,000 won, the 42.1 percent stake is valued at about 630 billion won. Including management premiums, creditors expect the stake sale could reach as high as 1 trillion won.

The banks acquired the stake in a debt-to-equity swap in 2010 when the company suffered a severe liquidity shortage. At the time, they signed an agreement that they would first negotiate with the Kumho chairman when unloading their Kumho Tire stake.

To encourage foreign tire companies and financial investors to take part in the bid, creditors have decided to pay part of the costs incurred when bidders conduct due diligence.

Creditors’ attempts to bolster the sales price of Kumho Tire will likely make it more difficult for the Kumho chairman to buy back the company, said an official at one of the country’s major business associations.

“We all know that Park has repeatedly vowed to take back control of Kumho Tire from creditors to rebuild his fallen empire,” the official said. “It is unfortunate that he won’t be able to acquire the stake through a third party.”

Last December, Park successfully took back Kumho Industrial, the group’s holding firm, via a special purpose company that he set up after attracting investments from corporations and financial investors. But the chairman is barred by creditors from using the same tactic, meaning that he has to use his personal wealth to take back control of Kumho Tire.

Kumho Asiana Group said it will draw up a plan to acquire the tire unit after the preferred bidder is selected early next year.

“As Chairman Park has repeatedly said, he will use all possible means to acquire Kumho Tire,” a group official said. “But at the moment, nothing has been decided yet. We will continue to monitor the situation and remain vigilant to effectively deal with any changes.”

Outside Korea, Kumho Tire operates four plants in China, and one each in Vietnam and the United States. In the second quarter of this year, the company earned 744.8 billion won in sales, down 5.1 percent from a year earlier, while posting a 40.7 billion won operating profit, down 26.4 percent.