China's Doublestar takes control of South Korea's Kumho Tire in $597 million deal

SHANGHAI (Reuters) - China’s Qingdao Doublestar Co Ltd said on Monday that its parent had agreed to pay 646.3 billion won ($597.4 million) for a 45 percent stake in South Korea’s troubled Kumho Tire Co Inc.

A unit of its controlling shareholder, Doublestar Group, would buy 129.3 million ordinary shares in Kumho Tire, capping a lengthy takeover process, the Chinese firm said in a statement to the Shenzhen exchange.

In September, Korea Development Bank (KDB) and other Kumho Tire creditors terminated an $872 million deal to sell a stake in Kumho to Doublestar after the Chinese firm demanded a cheaper price, citing the tyre maker’s weakening profits.

An over-ambitious acquisition strategy run by Kumho Tire’s former parent company before the global financial crisis left the conglomerate saddled with debt, leading to Kumho Tire being put under a creditor-led debt restructuring in late 2009.

In January last year Kumho Tire said that Doublestar had been chosen as the preferred bidder to buy a controlling stake in the firm. The South Korean firm’s creditor originally put the stake up for sale in 2016.

KDB said on Friday that the sale to Doublestar would help Kumho Tire expand its supply network and provide liquidity, but the firm’s union has protested against the deal and said it will fight back against the sale.

Ryu Gwan-joong, a union spokesman, said workers were considering launching strikes, including a possible partial walkout on March 9.

Despite the news, Kumho Tire’s shares fell nearly 10 percent on Monday while Doublestar slid 2.4 percent.

Reporting by Adam Jourdan in SHANGHAI; Additional reporting by Ju-min Park in SEOUL; Editing by Stephen Coates and Kim Coghill