SEOUL, South Korea — After months of uncertainty, it appears Kumho Tire Co. Inc. will have a new owner — China's Qingdao Doublestar Tire Co. Ltd.
Kumho announced April 4 that its management and union have agreed to a plan by the firm's creditors to sell a controlling stake in South Korea's second-largest tire maker to Doublestar.
Although Kumho did not release financial figures, European Rubber Journal, Tire Business' sister publication, reported that Doublestar's investors' group would acquire a 45-percent stake from shareholder Korea Development Bank (KDB) through a $630 million private placement of shares to Doublestar and three Chinese state-owned companies, Qingdao Conson Development (Group) Co. Ltd., Qingdao City Construction Investment (Group) and Qingdao Port International Co. Ltd.
The transaction, Kumho said, would begin through rights issues in the next three months.
Kumho said Doublestar has guaranteed that Kumho's management team, based in Seoul, will continue to operate the tire maker independently and build the brand. It said that Doublestar has vowed "to invest a substantial amount of capital in the company to get it back on track and profitable."
Kumho said additional Kumho creditors will invest more capital to cover expenditures to resolve the current debt and liquidity crisis. "Planned capital invests will be leveraged to stabilize the company and upgrade and expand manufacturing and R&D facilities, augment innovative technology and increase OE supply opportunities across the globe," the company said.
In the announcement, Kumho said it would focus on upgrading production lines for eco-friendly tires to better compete in the "highly competitive, technology-intensive market segment." It said it also plans to make its tires more affordable by normalizing production in China and enhancing quality by improving production in Korea and across the world, in order to "help build its brand value further."
KDB, a South Korean state-owned policy bank, is part of a consortium that owns a 42-percent stake in Kumho; the consortium's ownership will drop to 23 percent after the placement.
In late 2016 Doublestar agreed to buy KDB's stake in Kumho before disagreements over trademark rights and Kumho's profitability eventually led to the cancellation of the deal.
The new price is 30-percent lower than the old price, Doublestar said.
In late March, Korean tire retailer Tire Bank declared its interest in acquiring Kumho, but insiders questioned whether the company had the financial resources to effect a deal, according to various Korean press reports.
Daejeon, South Korea-based Tire Bank is described as a family-owned business operating 400 outlets throughout Korea, generating roughly $345 million in annual sales.
The Korea Herald and other Korean newspapers reported March 27 that the tire retailer had placed its bid just four days before a deadline set by creditors to inject capital into Kumho.
Kumho reported an operating loss of $39.6 million for the nine months ended Sept. 30, 2017, on sales of $1.66 billion. Full-year financials have not been released.
Kumho last year completed a $500 million project to relocate and upgrade separate passenger and truck tire plants to a single site in Nanjing, Jiangsu, China.
Doublestar was No. 23 on Tire Business' 2017 Top 75 tire makers' ranking, with 2016 sales of $1.06 billion. Kumho was No. 14, with sales of $2.4 billion.