April 27, 2024

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[THE INVESTOR] The Chinese government has recently warned four Chinese firms to refrain from jacking up their bidding prices to purchase Kumho Tire, a South Korean tire maker, local news outlet Edaily reported on Dec. 5.

Four Chinese firms, including Jiangsu GPRO Group, Shanghai Aerospace Industry Corp., Qingdao Doublestar and Linglong Group, as well as Indian tire maker Apollo Tyre, have entered the preliminary bid to purchase a 42 percent stake in Kumho Tire. 

The newspaper, citing unnamed industry sources, said the Chinese authorities have notified the firms to hold back competition over concerns that the bidding war among Chinese firms could drive up the sale price, which would only benefit the Korean firm.

Industry watchers say the move can be seen as part of China’s retaliation over South Korea’s decision to deploy the US-made missile defense system THAAD in the region. China has been vocal about its opposition to the deployment, implementing strict countermeasures against South Korean businesses.

During the preliminary bidding, China’s state-owned SAIC offered the largest amount, according to industry sources. Doublestar is also raising 1.7 trillion won (US$1.44 billion) funds for the buyout.

Creditors of Kumho Tire that graduated from a court receivership program last year are expecting the deal could fetch more than 1 trillion won.

The final round of bidding is expected to take place in January next year.

Kumho Asiana Group Chairman Park Sam-koo holds the right of first refusal in the sell-off that allows him to repurchase the stake under the same terms as the highest bidder.

By Ahn Sung-mi (sahn@heraldcorp.com)