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February 01, 2002 01:00 AM

Kumho picks U.S. investors consortium for further takeover talks

Bruce Davis
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    SEOUL, South Korea (Feb. 1) — Kumho Industrial Co. has picked an investors' consortium involving JP Morgan Chase & Co. and Carlyle Group as the preferred bidder for a majority ownership stake in its Kumho Tire activities.

    Kumho Industrial is selling up to 80-percent control in its Kumho Tire unit, which is considered the world's 10th largest tire maker with $1.2 billion in annual sales. Kumho operates two plants in South Korea with combined annual capacity of 31 million tires, and another in China, which can make 4.6 million tires a year.

    The JP Morgan Chase/Carlyle bid was chosen over another joint bid from Goldman Sachs/Newbridge Capital, Kumho said. Kumho Industrial is said to be asking for up to $1.5 billion for the stake. A memorandum of understanding is expected by mid-February.

    Neither JP Morgan nor Carlyle had commented publicly on the deal as of Feb. 1.

    Washington-based Carlyle Group is a private global investment firm that specializing as lead equity investor in management-led buyouts, strategic minority equity investments, equity private placements, consolidations and buildups, and growth capital financings. As of Sept. 30, 2001, the firm had more than $12.5 billion of committed capital under management.

    JP Morgan Chase is a wholesale financial services firm — investment banking, asset management, private banking, private equity, custody and transaction services, retail and middle market financial services, and e-finance — that resulted from the merger of Chase Manhattan Corp. and J.P. Morgan & Co. Inc. in 2000. The firm manages assets of $694 billion and has operations in more than 50 countries.

    Kumho Group is a diversified concern with activities in airlines, construction, petrochemicals, finance, ground transportation and tires.

    Kumho had tried in 1999 to sell a 50-percent stake in the tire business to another tire maker, but talks with several parties failed because they couldn't agree on an equitable market value for the assets, executives said at that time.

    Kumho is still open to discussions with other tire companies about technology cooperation, Mr. Cho said.

    Separately, Kumho is investing undisclosed amounts in its Korean and Chinese plants to modernize and expand them, Mr. Cho said. In particular, Kumho is converting bias-ply truck tire capacity at its Kwangju, South Korea, and Nanjing, China, plants to radial, Mr. Cho said.

    “The markets for bias-ply tires are shrinking steadily,” Mr. Cho said, “and competition in these markets means there's little or no profits in them.”

    In 2001, North America became Kumho's largest export market, supplanting Europe, Mr. Cho said. North America now accounts for about 20 percent of Kumho's global tire sales, due largely to 32-percent sales growth last year by Kumho Tire U.S.A. Inc., to $218 million.

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