Mergers & Acquisitions

Shoemaker buys Kumho Tire as Chinese firms scour the globe for parts in world’s No. 1 auto market

PUBLISHED : Tuesday, 06 March, 2018, 6:17pm
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Qingdao Doublestar Group is poised to become the controlling shareholder of troubled tyre maker Kumho Tire, after agreeing to pay about US$600 million for 45 per cent of the South Korean firm.

Doublestar, a conglomerate with businesses that include shoemaking, machinery and tyre production, said it would pay 646.3 billion won (US$600.8 million) for Kumho in a share placement, part of the 2009 restructuring plan to bail out the debt-ridden South Korean tyre company.

Doublestar has signed a pact with Kumho’s major creditor Korean Development Bank (KDB) for the share purchase deal after more than a year of negotiations. The company said there were still uncertainties in the transaction. The purchase is being opposed by Kumho’s labour union, according to a Reuters report.

“Chinese carmakers and auto part suppliers are actively seeking to expand their capacity around the world,” said Cui Dongshu, secretary general of the China Passenger Car Association. “Doublestar’s share purchase plan is another example that a global buying spree will continue.”

In January, 2017, Doublestar was selected as the preferred bidder to buy Kumho, but the US$872 million outright takeover of the South Korean firm was rejected by creditors in September as Doublestar demanded a cheaper price.

CEO of Geely-owned Volvo Cars loses board seat at truck maker after Li Shufu buys Daimler stake

As many as 28.88 million vehicles were sold last year in China, a 3 per cent increase in the world’s largest automotive market that lifted all assemblers and component makers, pushing them overseas to buy technology, designs and talent. Auto assets outside the country appear to be one bright spot for receiving Chinese investment as the mainland leadership encourages companies to acquire assets in the real economy that will eventually bolster the country’s manufacturing might.

Geely’s founder Li Shufu spent US$9 billion buying 9.7 stake in Daimler, the parent of German marque Mercedes-Benz, in the open market.

The Chinese billionaire said he was keen to cooperate with Daimler on various areas.

Geely is the pioneering Chinese auto company to embark on a “go-global” strategy, looking to marry European styling and technology with its manufacturing capability and the vast potential of the domestic market.

“Chinese companies are not only introducing global players to expand mainland productions, but are looking to have productions outside the mainland,” said Cao Hua, a partner at private equity group Unity Asset Management. “More global assets will be targeted by Chinese investors.”