April 24, 2024

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[THE INVESTOR] The executive board of Kumho Industrial on July 18 proposed a revised offer regarding the Kumho Tire brand, partially accepting creditors’ version but remaining firm on who pays fees for the brand.

“The executive board of Kumho Industrial has decided to accept the revised offer from Korea Development Bank of paying 0.5 percent of sales for 12.5 years for brand rights to Kumho Tire,” the company said through a statement. 

However, Kumho Asiana said that while it agreed to the 0.5 percent rate at 12.5 years, it would not permit 0.2 percent to come from Doublestar and 0.3 percent to come from the creditors, but would require Doublestar, the actual user of the brand, to pay the whole 0.5 percent.

“We believe that it is the correct procedure to receive brand usage fees directly from the user,” a spokesperson for Kumho Asiana said.

The decision came at a meeting of Kumho Industrial’s executive board on July 18 morning. The use of the Kumho name had been the sticking point in Kumho Tire creditors’ efforts to sell a controlling stake in the tire company to Chinese company Doublestar.

Earlier this month, the creditors of Kumho Tire offered to pay 0.3 percent of Kumho Tire’s revenues in order to use the Kumho name. This was a compromised version of the proposal that would have paid out the difference between Kumho Industrial’s initial proposal of 0.5 percent and Doublestar’s 0.2 percent for the first five years, followed by a possible extension of 15 years.

The agreement, as proposed, would have allowed the creditors to maintain its existing contract with Doublestar by paying out the difference to Kumho Industrial. The 12.5-year period is also a compromise of Kumho’s original demand of 20 years of obligatory use and Doublestar’s agreement, adding together Doublestar’s agreed five years of obligatory use and half of the additional 15 years asked by Kumho.

Kumho Asiana Chairman Park Sam-koo had sought to buy back Kumho Tire from his creditors, but his efforts were thwarted when the creditors, led by Korea Development Bank, refused to allow him to form a consortium to bid for the 42 percent stake.

Since the stock purchase agreement between Doublestar and Kumho Tire’s creditors, Park had been thought to be indirectly delaying the final sale by holding back the rights to the Kumho name, which is owned by Kumho Industrial.

However, in the statement, Kumho Asiana Group said that it would “respect and humbly accept” the decision of the Kumho Industrial board.

This move, which allows the creditors to effectively move forward with the Doublestar deal, comes as employees within Kumho Tire had publicly opposed the acquisition by the Chinese company. On July 13, executives at Kumho Tire released a joint statement saying that they would all resign if the company was sold to Doublestar.

There are concerns that the deal might affect the job stability of employees at Kumho Tire as well as lead to Doublestar acquiring Kumho Tire’s technology and then shedding the company. Although Doublestar has said that it will “hold all job positions and recruit local talent” after the acquisition, union members strongly protested the deal. 

By Won Ho-jung/The Korea Herald (hjwon@heraldcorp.com)