You can't fault Kumho Group for trying to talk a company into paying $1 billion to buy a 50-percent interest in the South Korean conglomerate's tire business. Hey, if you don't ask.... No one bit, and now Kumho is going to Plan B, seeking a ``strategic partner,'' which could mean a lot of things short of a financial investment.
It's not that Kumho's tire operation is a low-quality, failing business. It isn't. The problem is Kumho wildly overpriced the business' value, ignoring that the tire manufacturer lacks attributes a potential partner would demand.
On the price issue, Kumho had to be kidding: $1 billion for a half-share of a manufacturer that has annual sales of less than $1 billion?
The going rate for a tire producer of Kumho's status isn't anywhere near that amount. For example, Goodyear's more-or-less acquisition of Sumitomo Rubber Industries Ltd.'s tire business cost $936 million, after a stock swap. And for that, Goodyear got a tire operation that produces $2.5 billion in sales.
The other problem Kumho undoubtedly encountered in its negotiations with most of the world's major tire makers concerns what the South Korean company really has to offer.
One potential buyer opined that Kumho's brand is hardly a household name in the tire business: He referred to the company as a ``bulk producer of tires,'' that offers production capacity and distribution, but not a noteworthy brand.
Finally, Kumho has said all the possible buyers it talked to wanted management control of its tire business. The company won't grant that.
Which means the ever-popular ``alliance,'' rather than an outright investment, is Kumho's only viable option.