Following rumors that Continental AG, Michelin and ChemChina are in talks to bid for Kumho Tire Co., South Korean media reports that creditors of the tiremaker are poised to sell their combined 42.01% stake in the company as early as August.
The local brokerage industry estimates Kumho Tire could sell for at least 1 trillion won (more than $870 million) and go for more than 1.5 trillion won if more competition is presented, media reports. Potential buyers now reportedly include Bridgestone Corp., Michelin Group, and China National Tire and Rubber Co. (ChemChina).
On Wednesday, state-run Korea Development Bank (KDB) and other creditors of Kumho Tire hosted a shareholder council meeting at the KDB headquarters in Yeouido, western Seoul, to discuss selling their stakes. Kumho Tire creditors include Woori Bank with 33.7% voting rights, KDB with 32.2%, and KB Kookmin Bank with 9.9% (23.2% of voting rights are held by others). In order to begin the sales process of Kumho Tire, 75% or more creditors must give their consent.
It is still unknown if Park Sam-koo, chairman of Kumho Asiana Group, will regain control of Kumho Tire. He expressed interest to rebuy the tire company earlier this year and attempted to raise 1 trillion won to require Kumho Tire by setting up a special purpose company, but creditors foundered his attempt.
Park holds right of first refusal, which could allow him to repurchase management control under the same terms as the highest bidder. However, Park used the right of first refusal in May 2010 on condition that “the right does not pass on to others,” meaning he will not be given the same support this time around, local media reports. If Park gives up his right of first refusal, it is possible he could compete with other companies for Kumho Tire by either forming a consortium or setting up a special purpose company.
Creditors are expected to make a final decision on Kumho Tire’s sale later this month during a vote at a separate shareholder council meeting. If approved, Kumho Tire will most likely be for sale in August.
