Kumho Tire: Will South Korea’s new President stop sale to Doublestar?
Moon Jae-in is South Korea’s new President, and this may be bad news for Qingdao Doublestar and its efforts to acquire a controlling share in Kumho Tire. In an article published earlier today, The Korea Times explored the possibility that Moon may prevent the Chinese tyre maker from acquiring Doublestar. According to the financial daily, analysts consider this a very real threat to the deal.
“Moon has expressed negative views toward the mid-tier Chinese tyre maker’s takeover of Kumho Tire, raising concerns over job security and adverse effects on the local economy,” reported The Korea Times. It shares that Moon publicised his views prior to the South Korean election; in a message posted to Facebook in March, he urged the Korea Development Bank (KDB) to consider job security when selecting a new owner for the Kumho Tire share. Noting that some 3,800 workers are employed at the three Kumho Tire plants in South Korea, he said the country “cannot afford” to let the company “suffer the same fate” as SsangYong Motor, which was purchased by Shanghai Automotive Industry at the cost of hundreds of local jobs.
An analyst said to be familiar with the situation told The Korea Times that Moon’s new government “will not let market economy principles alone dictate the sale of Kumho Tire.” The unnamed source said Moon wouldn’t approve of Doublestar’s purchase of the 42.01 per cent share “under the current terms.” Instead, the expectation is that Moon will require the Chinese company to guarantee Korean jobs as well as pledge to invest in Kumho Tire and respect proprietary technologies. These requirements may prove too much: “Double Star may withdraw its takeover bid if these preconditions are too harsh. If so, this would be good news for Kumho chief Park,” the analyst added.
In addition, Doublestar and Kumho Asiana chairman Park Sam-koo have so far failed to reach a consensus regarding the use of the Kumho brand name. The Korea Times shares comment from KDB that Doublestar “is not interested in buying Kumho Tire if it cannot use the Kumho trademark.”
Should Qingdao Doublestar withdraw from the deal, Park Sam-koo will once again gain first right of refusal to acquire the controlling share in Kumho Tire.