Report: Kumho Tire deal stalled amid brand royalty hold-up

Seoul – A deal between China’s Doublestart Tyre Co. and Kumho Tire creditors has drifted off-course following royalty demands by former parent company Kumho Industrial Co., according to local news reports.

The reports followed an announcement on 12 June by chairman of Kumho Asiana Group Park Sam-koo who raised a trademark fee from 0.2% to 0.5% of annual sales.

"Under the renewed terms, Doublestar will have to pay KRW150 billion won (€119 million) every year for the next 20 years to Kumho Industrial when substituting the rate to last year’s sales figure, which was KRW3 trillion," said Korea JoongAng daily 12 June.

Park, added the daily, has also requested to extend the trademark’s mandatory usage period from five years to 20 years, making the Chinese firm pay trademark usage fee longer than expected.

According to Nikkei Asian Review, Doublestar had told Kumho Tire creditors, led by Korea Development Bank, that it was “impossible to accept Kumho's suggestion."

Doublestar signed a KWR995 billion (€778 million) stock purchase agreement with Kumho creditors in March to acquire a 42.01% majority stake in the Korean tire company.

As the former owner of the business, Park Sam-koo had the right to match Doublestar’s bid to buy back the shares.

He gave up the right in April claiming the creditors had denied him the chance to form a consortium to finance the buy-back.

Park said in a statement that creditors, led by the Korea Development Bank (KDB), had notified him that he would not be allowed to form a consortium to buy the shares despite Doublestar winning the bid through a consortium.