April 26, 2024

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The amount is larger than its bid of US$845.39 million for acquiring controlling stake in Kumho Tire. According to sources, once the deal is clinched, Doublestar plans to use the remainder of the fund for future investments, including other takeover projects. 

The company plans to raise the funds through additional investments from financial investors, as well as leveraging from banks. 

Weber Shandwick Korea, the local PR representative for Doublestar, said it cannot confirm whether the entire target amount has been raised. 

Five Qingdao-based firms -- including Doublestar -- have invested a combined US$196.99 million in the fund, while the remaining US$648.4 million will be borrowed from banks. 

However, there are doubts over Doublestar’s financial capacity as the Chinese tire maker has to take out massive loans to acquire Kumho Tire. Industry watchers say it is likely that the Korean company would have to help shoulder Doublestar’s financial burden during the highly leveraged buyout process. 

“The creditors approved Doublestar’s financing plan after checking its financial status. It concluded Doublestar has no problem in acquiring Kumho Tire,”a Weber Shandwick official told The Investor, adding it is unlikely for Doublestar to use Kumho Tire’s cash reserves to pay back its debts. 

Doublestar signed a stock purchase agreement with creditors on March 13 to buy 42 percent controlling stake in Kumho Tire. The deal has not been finalized as Kumho Asiana Group Chairman Park Sam-koo can practice his rights of first refusal to buy back the tire-making unit by April 19, as part of a debt restructuring deal in 2009. 

Park has said he would not exercise his priority buyback rights unless Kumho Tire creditors allow him to form a consortium for the takeover. He has further threatened to take legal action against the main creditor state-run Korea Development Bank.

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