Creditors have stepped in to referee to save an $851 million deal after China’s Doublestar Tyre Co., preferred bidder to buy out bigger Korean tire maker Kumho Tire, refused to accept separate terms demanded by its previous parent company Kumho Industrial Co. for use of the Kumho brand.
According to the tire maker’s main creditor Korea Development Bank (KDB) on Monday, Doublestar rejected Kumho’s own terms on use of Kumho trademark and indicated it could walk out if it has to pay royalty fees more than doubling what it had agreed upon in the 955 billion won package it had struck with creditors for a 42.01 percent stake in March.
KDB reaffirmed hard-line stance against Kumho Asiana Group that has been blocking the deal by demanding Park Sam-koo, chairman of Kumho Asiana Group, to relinquish his title as the chief executive of Kumho Industrial and withholding rollover in debt by warning that the tire maker could be sent to the bankruptcy court.
Creditors of Kumho Tire including KDB, Woori Bank, KB Kookmin Bank, Export-Import Bank of Korea, NH Nonghyup Bank, KEB Hana Bank and Gwangju Bank held a meeting on Monday to press Park to respect the creditors’ terms and give an answer by Friday.
The Qingdao-based Doublestar’s bid to acquire Kumho Tire has been stalled because Kumho Asiana Group refused to hand over its trademark rights to the Chinese bidder. After creditors gave an ultimatum to send the tire company to the bankruptcy court if the group disallows the use of its brand, Kumho Industrial last Friday demanded the Chinese company pay royalty fees in 0.5 percent of the annual sales and oblige mandatory use of Kumho brand for 20 years instead of five. Under the new terms, Doublestar would have to pay Kumho 150 billion won annually based on last year’s sales of 3 trillion won for the next 20 years.
It remains unclear whether creditors can mediate a compromise between the two. Kumho Asiana insists on getting at least 0.5 percent as it levies 1 percent of sales in royalties from its overseas units. Doublestar meanwhile demands the Korean party keep to the original royalty terms - 0.2 percent of annual sales and choice to continue to use Kumho brand five years after acquisition.
The deal also heavily protested by employees and suppliers of the Gwangju-based tire maker and residents in the city could fall through if it is not sealed by the end of September.
By Kim Jung-hwan and Chung Seok-woo
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]