[THE INVESTOR] Competition is heating up between Kumho Asiana Group Chairman Park Sam-koo and the preferred bidder Double Star, a Chinese state-run tire maker, over landing the 42.01 percent stake of Kumho Tire, South Korea’s second-largest tire firm, up for sales by its nine creditors.
In his New Year address, Park vowed to complete the rebuilding of the group by acquiring the group‘s tire maker.
According to industry watchers, Park is keen on regaining control of the tire unit as it is a cash cow for the group that also has symbolic value.
Late Chairman Park In-chon, who is the father of current Chairman Park, established Kumho Tire in 1960 to supply high quality tire to Kumho Buslines that marked the beginning of Kumho Asiana Group.
Sitting Chairman Park and his eldest son Park Sae-chang both started their careers at Kumho Tire.
Among 25 affiliates run by Kumho Asiana Group, the tire maker is the group’s second-biggest cash cows that generated sales of 3.04 trillion won and flagged an operating profit of 39.1 billion won ($33.2 million) in 2015, according to company data.
It is also the world’s 14th biggest tire company that operates nine plants in four countries; four in China, three in Korea, one each in Vietnam and the US.
In 2009, however, Kumho Tire and Kumho Industrial were put under workout programs led by creditors due to a liquidity crunch.
Park stepped down from his post in 2010, taking full responsibility for management failure.
Three years later, he returned to the chairman post and acquired Kumho Industrial in September 2015 at 722.8 billion won.
Park is now left with a final task of buying back Kumho Tire to restore a full house that will also strengthen his position in the group.
To reacquire the tire unit, Park can practice his preemptive right and offer a higher bid than the suggested bid of some 1 trillion won pitched by the Chinese preferred bidder.
Market experts projected a tough journey ahead.
The group has not yet settled debts from buying back management rights of Kumho Industries, which Park invested 120 billion won and borrowed 600 billion won.
“We are reviewing various ways to manage funds,” Park had said.
To collect some 1 trillion won, he is most likely to establish a special purpose company that he will own 100 percent of the shares, and attract financial investors, according to industry insiders.
Kumho Electric Inc. Chairman Park Myung-koo, who is Park Sam-koo’s cousin, alongside Daesang Group Chairman Lim Chang-wook, Park’s younger sister’s husband, are considered potential financial investors that will help Park restore the group, local reports said.
Meanwhile, contrary to reports of the group’s full-service carrier Asiana Airlines Inc. also stepping in as a financial investor, its President and CEO Kim Soo-cheon said that it does not have sufficient funds.
Creditors are scheduled to complete a stock purchase agreement with Double Star by mid-February, before asking Chairman Park whether he will practice his preemptive right.
“A stock purchase agreement will be entered if 75 percent of creditors agree. The final variable is the preemptive right of Chairman Park Sam-koo,” said Jung Yong-jin, an analyst of Shinhan Investment Corp.
Once Park is informed of the details of the stock purchase agreement, he has a month to decide whether to practice his right and offer a higher bid than Double Star.
If he chooses to go ahead, he needs to submit a financing plan and contract fee within 45 days.
In case Park fails to collect enough capital or backs off, acquisition rights will be handed over to Double Star.
A Kumho Tire spokesperson said they do not know details about the chairman’s plan, apart from the fact that he is reviewing all possible measures.
The announcement on the final acquirer is expected to be made by April at the latest.
By Kim Bo-gyung/The Korea Herald (firstname.lastname@example.org)