SEOUL, South Korea—Doublestar Tire Co. Ltd. may finally be gaining control of Kumho Tire Co. Inc.
After nearly a year of negotiations, Kumho said in a statement that on April 1 its management and union have agreed to a plan by the firm's creditors to sell a controlling stake in South Korea's second-largest tire maker to Doublestar.
Although Kumho did not release financial figures, European Rubber Journal, sister publication to Rubber & Plastics News, reported that Doublestar's investors' group would acquire a 45 percent stake from shareholder Korea Development Bank through a $630 million private placement of shares to Doublestar and three Chinese state-owned companies, Qingdao Conson Development (Group) Co. Ltd., Qingdao City Construction Investment (Group) and Qingdao Port International Co. Ltd.
Kumho said the transaction would begin through rights issues in the next three months.
Based in Qingdao, China, Doublestar has guaranteed that Kumho's management team, based in Seoul, will continue to operate the tire maker independently and build the brand. Kumho said that Doublestar has vowed to invest a substantial amount of capital in the company to get it back on track and profitable.
"Doublestar has guaranteed to allow the Kumho Tire management team based in Seoul, Korea, to run the business independently and continue to market the brand name which is similar to the acquisition of Volvo by China's Geely," Kumho said in its statement. "In 2010, the Chinese automaker bought Volvo and focused on investing capital into the Swedish car manufacturer, while allowing for independent management in order to further build the Volvo brand."
Kumho added that additional creditors will invest more capital to cover expenditures to resolve the current debt and liquidity crisis.
"Planned capital investments will be leveraged to stabilize the company and upgrade and expand manufacturing and R&D facilities, augment innovative technology and increase original equipment supply opportunities across the globe," the company said.
Kumho said it will focus on upgrading production lines for eco-friendly tires to better compete in what it described as a highly competitive, technology-intensive segment. It also plans to make its tires more affordable by normalizing production in China and enhancing quality by improving production in Korea and across the world.
KDB is a South Korean state-owned policy bank and part of a consortium that owns a 42 percent stake in Kumho. The consortium's ownership will drop to 23 percent after the placement.
In late 2016 Doublestar agreed to buy KDB's stake in Kumho before disagreements over trademark rights and Kumho's profitability eventually led to the cancellation of the deal.
Doublestar said in March that the new price is 30 percent lower than the old price.
Kumho reported an operating loss of $39.6 million for the nine months ended Sept. 30, 2017, on sales of $1.66 billion. Full-year financials have not been released.
In 2017, Kumho completed a $500 million project to relocate and upgrade separate passenger and truck tire plants to a single site in Nanjing, Jiangsu, China.
Doublestar was No. 23 on Rubber & Plastics News' Global Tire Report, which ranks the top 75 tire makers in the world. The firm reported with 2016 sales of $1.06 billion. Kumho was No. 14 with sales of $2.4 billion.
European Rubber Journal, sister publication to Rubber & Plastics News, contributed to this report.