By Lee Hyo-sik
The Korea Development Bank (KDB) faces a bumpy road to the sale of Kumho Tire to a Chinese tiremaker.
KDB, which holds a 42.1 percent stake in Kumho Tire, has been criticized by politicians and Kumho employees who raise concerns about a possible technology leak and job security if Double Star Tires acquires Korea’s second-largest tiremaker.
Above all, the right to use the Kumho Tire brand has emerged as the most contentious issue as KDB promised to allow the mid-tier Chinese tiremaker to use the trademark for 20 years without gaining consent from Kumho Industrial. Kumho Industrial owns the trademark rights and is controlled by Kumho Asiana Group Chairman Park Sam-koo.
Park has been calling the stock purchase agreement (SPA) between KDB and Double Star flawed, arguing that the state-run bank should conduct another bid. The chairman said Kumho Industrial never agreed to permit the Chinese company to use the Kumho trademark.
Analysts say that if Double Star, the world’s 34th-largest tiremaker by sales, cannot use the Kumho brand, it won’t pay 955 billion won ($840 million) for the 42.1 percent stake in Kumho Tire, the 14th-largest.
However, KDB officials said the bank will resume sales negotiations with Double Star Thursday to iron out differences on the detailed terms of the SPA signed last month.
“If Kumho Chairman Park does not inform us that he wants to exercise his buyback right by midnight Wednesday, we will immediately take follow-up steps to restart the sales procedure with Double Star,” a KDB official said.
“We will not organize a bid again under any circumstances.”
Earlier this week the Kumho chief said he will not exercise his buyback right if the KDB does not allow him to form a consortium, insisting that the bank’s sales agreement with Double Star is legally flawed.
“We demand the KDB conduct a bid again in a fair manner,” the chairman told reporters. “We will not take legal action for the time being and instead closely monitor the situation. But if the sales process going forward hurts the fundamentals of Kumho Tire, we will file a lawsuit or take other measures to prevent it.”
Many expect the SPA is not likely to go through, citing the controversy over the Kumho trademark.
Kumho Industrial owns the trademark and collects fees from its affiliates. Park and eight other individuals hold a 66.5 percent stake in Kumho Holdings, which has a 46.1 percent share in Kumho Industrial.
KDB also has to receive regulatory approval from the Fair Trade Commission for the sale. It also needs to get the green light from the Ministry of Trade, Industry and Energy if Double Star wants to acquire Kumho Tire’s defense unit, which supplies tires for the nation’s fighter jets and ground vehicles.
“In addition to growing concerns over technology leaks and massive layoffs, the state-run bank will have a hard time negotiating with Double Star if Kumho Group does not allow the use of its corporate brand,” said an analyst familiar with the matter, who declined to be named.
“Besides Kumho Tires’ manufacturing technologies and production facilities, the Chinese firm wants to use its brand. Without the right to use the Kumho trademark, Double Star wouldn’t pay 955 billion won,” he said. “The Kumho chief will not permit the Chinese firm to use its corporate brand and will derail the ongoing deal. So he can have another shot at acquiring the group’s tire unit.”