SEOUL -- Kumho Tire will go under ownership of Chinese competitor Qingdao Doublestar, bringing an end to a long buyout process for South Korea's debt-laden No. 2 tiremaker.
The state-owned Korea Development Bank, representing Kumho's creditors, announced the signing of an agreement under which Doublestar will purchase a leading 45% stake in Kumho for 646.3 billion won ($605 million) through a private share issue, pending government approval.
Doublestar has agreed not to sell the shares for three years.
For Doublestar, the deal will serve to catapult it into the ranks of the world's biggest tire companies. Together, Kumho and Doublestar would place among the top 10 players by market share, challenging Chinese rival ZC Rubber for the lead in China, the world's biggest auto market. Kumho ranked 14th in the world as of 2016, with a 1.6% share.
The idea of a Chinese buyout aroused opposition on the South Korean side. To sweeten the deal, Doublestar guaranteed Kumho employees' jobs for three years, and pledged up to 200 billion won in capital spending to boost the South Korean tiremaker's competitiveness.
Kumho also says it has received a guarantee of management independence from Doublestar, which will give Kumho's creditors the right to appoint at least one member to the board of directors.
In January 2017, Kumho's creditors picked Doublestar as the preferred bidder for the sale of a roughly 40% stake in the company, but resistance from the labor union scuttled the deal. After failing to agree on a purchase price with a prospective South Korean buyer, the creditors reopened talks with Doublestar last month.