Cooper Tire & Rubber Co. plans to buy an approximate 11-percent stake in the South Korean tire maker Kumho Tire Co. Inc. as a first step in its global repositioning strategy.
Cooper said the acquisition is in connection with Kumho's plan for an initial public offering on the Korea and London stock exchanges and is expected to close in the first quarter. Cooper reportedly will obtain its share from the South Korean Military Mutual Aid Association (MMAA), which owns 50 percent of Kumho.
A proposed purchase price was not disclosed. The price eventually will depend on the value of the Kumho shares to be offered starting in February, according to Thomas A. Dattilo, Cooper's chairman, president and CEO. For reference, the MMAA paid $1.2 billion in May 2003 for its 50-percent stake.
``This is a wise investment for us as we begin the process of repositioning the company after the sale of Cooper-Standard Automotive,'' Mr. Dattilo said. Cooper recently completed the sale of its Cooper-Standard Automotive unit for $1.17 billion, freeing up considerable cash for reinvestment.
``We believe it is important for Cooper to form strategic relationships with other strong players in the global tire industry,'' he continued, ``to realize a good return for shareholders and continue our planned growth in products, technology and market share.''
Initially, Cooper's investment in Kumho Tire will result in a positive return for shareholders, Mr. Dattilo said. Long term, he added, the investment will serve as a platform to explore synergies in various areas of shared interest.
``Even though both Kumho Tire and Cooper will continue to operate independently, we believe we can partner in many areas for future benefit to all,'' he said.
Mr. Dattilo told Tire Business that at this point the two companies are not in a position to discuss publicly possible areas of cooperation-such as technology exchange or production off-take. But he pointed out that the two tire makers' strengths are largely complementary, with Cooper having production in the U.S. and Europe and Kumho in Asia, including one plant in China, where Cooper intends to become a major player in the next few years.
In North America, he said, Kumho is strong in performance tires whereas Cooper has a much broader product range.
Cooper and Kumho are considered the world's eighth and 11th largest tire makers, with tire-related sales of $1.87 billion and $1.36 billion, respectively.
After MMAA, Kumho Industrial Co. Ltd.-which sold the share to MMAA in 2003-is the second largest shareholder in Kumho Tire, with a 30-percent stake, according to company records.
Once completed, this would be Cooper's second beachhead in Asia. It already is a partner in a joint venture in China with Taiwan's Kenda Rubber Industrial Co. Ltd. and last year concluded passenger and medium truck radial off-take production agreements with Hangzhou Zhongce Rubber Co. Ltd. in Hangzhou, China.