SEOUL, South Korea—Qingdao Doublestar Group may finally be gaining control of Kumho Tire Co. Ltd.
After nearly a year of offers, Kumho said in an April 1 statement that 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.
Doublestar said in an April 10 statement that it and its subsidiary Xingwei Korea Co. have signed a contract with Kumho and its creditor representative, Korea Development Bank, to acquire a 45 percent stake in Kumho Tire through a $607 million private placement.
The transaction will consist of Doublestar purchasing 129.3 million Kumho shares at $4.70 per share and become its controlling shareholder. Doublestar said Kumho operates eight plants, three in South Korea, three in China, one in the U.S. and one in Vietnam, with an annual production capacity of 60 million units.
Kumho said the transaction would begin through rights issues in the next three months.
Qingdao, China-based 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 to run the business independently and continue to market the brand name," Kumho said in its statement, citing Geely's acquisition of Volvo as an example of how Doublestar-Kumho would be structured.
"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."