“Doublestar has pledged to allow an independent management team to run Kumho Tire as was the case of the acquisition of Volvo by China’s Geely Automobile Holdings in 2010,” Kumho Tire said in a statement. (Image: Yonhap)
SEOUL, April 3 (Korea Bizwire) – Kumho Tire Co., South Korea’s second-biggest tiremaker by sales, said Tuesday it will continue to use its brand name and its management will remain independent after being acquired by China’s Qingdao Doublestar Co.
“Doublestar has pledged to allow an independent management team to run Kumho Tire as was the case of the acquisition of Volvo by China’s Geely Automobile Holdings in 2010,” Kumho Tire said in a statement.
“Back then, Geely focused on capital injection into the Swedish carmaker, while allowing for independent management for further growth of the Volvo brand.”
Kumho Tire will continue to sell its products under the same brand name in global markets even after the Chinese truck and bus tiremaker obtains a controlling stake in Kumho Tire via a planned rights issue aimed at raising 646.3 billion won (US$611 million), the statement said.
Doublestar will buy up the new shares to be issued by Kumho Tire that will make them the No. 1 shareholder with a 45 percent stake in the tiremaker. After the rights issue, creditors will collectively own a 23.1 percent stake in Kumho Tire, down from the current 42.01 percent, a KDB spokesman said by phone.
Once the new shares are listed on the Korea Exchange, the country’s main bourse, by July or August, creditors plan to extend a fresh loan of 200 billion won to Kumho Tire, the spokesman said, adding that the exact time frame for the rights issue has yet to be decided.
On Sunday, Kumho Tire’s unionized workers voted to accept creditors’ plan to sell the company to Doublestar to avoid being placed under court receivership this month.
It was a sudden twist for creditors and the company as the 3,100-member union had strongly objected to the sale plan, citing concerns of technology theft and potential layoffs going forward.
To help put the debt-ridden tiremaker back on track, Kumho workers agreed to return some of their bonuses for 2018 and 2019, and to improve productivity at the company’s local plants, while accepting a wage freeze and a reduction in some work benefits by 2019.
Doublestar said it will guarantee job security for existing union workers for three years after taking control of management. It will also draw up a detailed investment plan for the Korean plants by the end of this year, with investments scheduled to begin in late 2019.
Moreover, Kumho Tire, its union, main creditor KDB and Doublestar agreed to form a “future committee” to help turn Kumho Tire around.
For the whole of 2017, Kumho Tire’s net losses deepened to 88.56 billion won from 37.9 billion won a year earlier. It has a whopping 2.4 trillion won in debt owed to domestic financial institutions.
Its going value stands at 460 billion won, far short of the firm’s liquidation value of 1 trillion won, in a due diligence report made by an accounting firm.
(Yonhap)
