April 26, 2024

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[THE INVESTOR] The prospect of Kumho Asiana Chairman Park Sam-koo reacquiring Kumho Tire was thrown into doubt as many deal watchers raised questions about the source and the details of 1 trillion won (US$876.77 million) fund Park had reportedly raised for the buyout.

“I cannot disclose the details (of the fund), but financial investors are making investments,” Park told reporters in Seoul on Feb. 13. “Because there are many variables, I am still looking for more strategic investors, beside the financial investors that I have already secured. There are many (investors) who are helping out in the deal.”

Last week, Kumho Asiana Group confirmed to The Investor that Park has raised enough capital from several financial investors and business associates to buy back a controlling stake of 42.1 percent in its tire-making unit from the creditors.

But without disclosing exact source of the fund, deal watchers have questioned whether Park really has secured the amount to outmatch Qingdao Doublestar, a Chinese tire maker that has been selected as the preferred bidder for acquiring a controlling stake in Kumho Tire.

“Park said he has raised the funds, but nothing is confirmed,” said an official at the Korea Development Bank, Kumho Tire’s main creditor. “First, Park has to submit his financing plans to the creditors so that we can check its legitimacy. After the review, the creditors will make a final decision whether Park can practice his right of first refusal to buy back Kumho Tire.”

“But first, Doublestar has to sign the stock purchase agreement with the creditors,” he said, adding the deal will be signed this month.

Doublestar reportedly offered between 900 billion won to 1 trillion won for Kumho Tire, according to sources at the creditor bank.

Officials from Doublestar were not immediately available for comments.

Park was granted a buyback option when the creditors took over Kumho Tire’s stake in a debt-to-equity swap in 2010, due to the liquidity crisis amid the group’s excessive business expansion.

The Kumho chief, who has expressed firm intentions of buying back the tire-making unit multiple times, can reacquire the company by paying more than Doublestar’s offer. But Park has to raise the amount solely from his own pocket, the creditors required.

Park -- who was said to be short on cash as he already spent 723 billion won last year to buy back another affiliate Kumho Industrial -- has set up a special purpose entity to raise funds from investors and his business associates.

But according to industry sources, it is highly likely that the investors are investing in return for management rights of Kumho Tire, considering Park’s lack of cash. In the worst case, Kumho Tire’s management could be handed over to a third party later on, the source added.

Even if Park buys back Kumho Tire, the mounting debts for the purchase could also jeopardize the company’s operations, another source added.

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