Competition is heating up between Kumho Asiana Group and the preferred bidder Double Star, a Chinese state-run tire maker, over a 42.01 percent stake the group’s affiliate Kumho Tire, South Korea’s second-largest tire firm.

Kumho Asiana Group Chairman Park Sam-koo vowed to complete the rebuilding of the group by re-acquiring the group’s tire maker from creditors in his New Year address, while Double Star is seeking to take over the local tire firm to leap forward as a top 10 global tire manufacturer.

According to industry watchers, Park is keen on regaining control of the tire unit as it is a cash cow for the group and also has symbolic value.

The late Chairman Park In-chon, who is the father of current Chairman Park, established Kumho Tire in 1960 to supply high quality tires to Kumho Buslines, marking the beginning of Kumho Asiana Group.

Sitting Chairman Park and his eldest son Park Sae-chang both started their careers at Kumho Tire.

Among 25 affiliates run by Kumho Asiana Group, the tire maker is the group’s second-biggest cash cow, generating sales of 3.04 trillion won and flagged an operating profit of 39.1 billion won ($33.2 million) in 2015, according to company data.

It is also the world’s 14th-biggest tire company and operates nine plants in four countries; four in China, three in Korea, one each in Vietnam and the US.

In 2009, however, Kumho Tire and Kumho Industrial were put under workout programs led by creditors due to a liquidity crunch.

Park stepped down from his post in 2010, taking full responsibility for management failure.

Three years later, he returned to the chairman post and acquired Kumho Industrial in September 2015 at 722.8 billion won.

Park is now left with a final task of buying back Kumho Tire to restore a full house that will also strengthen his position in the group.

To reacquire the tire unit, Park can practice his preemptive right and offer a higher bid than the suggested bid of some 1 trillion won pitched by the Chinese preferred bidder.

Market experts projected a tough journey ahead.

The group has not yet settled debts from buying back management rights of Kumho Industries, which Park invested 120 billion won and borrowed 600 billion won.

“We are reviewing various ways to manage funds,” Park had said.

To collect some 1 trillion won, Park is most likely to attract financial investors by establishing a special purpose company in which he will own 100 shares, according to industry insiders.

Kumho Electric Chairman Park Myung-koo, who is Park Sam-koo’s cousin, alongside Daesang Group Chairman Lim Chang-wook, Park’s brother-in-law, are considered potential financial investors that will help Park restore the group, local reports said.

Meanwhile, contrary to reports of the group’s full-service carrier Asiana Airlines also stepping in as a financial investor, its President and CEO Kim Soo-cheon said that Asiana did not have sufficient funds.

Creditors are scheduled to complete a stock purchase agreement with Double Star by mid-February.

“A stock purchase agreement will be entered if 75 percent of creditors agree. The final variable is the preemptive right of Chairman Park Sam-koo,” said Jung Yong-jin, an analyst of Shinhan Investment Corp.

Once Park is informed of the details of the agreement, he has a month to decide whether to practice his right and offer a higher bid than Double Star.

If he chooses to go ahead, he needs to submit a financing plan and contract fee within 45 days.

In case Park fails to collect enough capital or backs off, acquisition rights will be handed over to Double Star.

A Kumho Tire spokesperson said they did not know details of the chairman’s plan, apart from the fact that he is reviewing all possible measures.

The announcement on the final acquirer is expected to be made by April at the latest. 

By Kim Bo-gyung (lisakim425@heraldcorp.com)