SEOUL, South Korea—China's Qingdao Doublestar Co. said it has signed an agreement with Kumho Tire creditors to buy a 42 percent stake in the South Korean tire maker in a deal that could enable Doublestar to further expand in China.
The $830 million deal could help turn Doublestar into China's largest tire maker. Doublestar would purchase 66.4 million shares for $830 million, or at about $12.55 per share. That would be about 75 percent higher than Kumho Tire's closing price of about $7.17 per share on March 10. Kumho Tire increased nearly 7 percent in Seoul on March 13, the biggest gain since September.
If successful, Doublestar said it expects the combined company to be among the top 10 global tire makers. The firm ranked 34th in Rubber & Plastics News' 2016 Global Tire Report with $740.8 million in sales.
Based on 2016 sales figures, the combined company would be worth $3.4 billion, which would put it slightly ahead of the No. 10 company in the 2016 rankings—Zhongce Rubber Group Co. Ltd. reported $3.39 billion in sales for 2016.
Kumho ranked 14th at $2.66 billion. Its North American business accounts for about 22 percent of its sales. It opened its first U.S. manufacturing plant in Macon, Ga., in May 2016 with an annual capacity of 4 million tires.
"China is the key for Kumho Tire to break through difficulties that the company is facing as 40 percent of Kumho Tire's manufacturing capability is based in China," Doublestar said in an emailed statement. "Doublestar can help Kumho Tire to improve financial and operational hardships, and ultimately to achieve higher growth."
However, to accomplish these goals Doublestar will need to fend off a potential counter bid from Kumho Tire Chairman Park Sam-koo, who has said he wants to put together a consortium of investors to buy back the stake.