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Hankook Tire buys Australia's largest retailer Jax Tyres

South Korean company seeks expansion after Kumho announces possible sale to Chinese

A Jax Tyres store in Toowoomba, Queensland, Australia (Photo provided by Hankook Tire)

SEOUL -- Hankook Tire is expanding its retail channels by acquiring Australia's largest tire dealer Jax Tyres, as part of its strategy to reach consumers in the Asia-Pacific region directly, the company said Thursday.

Hankook said it decided to buy 100% of Jax from Chairman Fred Hurrell and others. The company declined to reveal the deal price, but local media reported that it was about 100 billion won ($87.1 million).

"We will concentrate more on enhancing global competitiveness by diversifying the inorganic business in the automotive sector based on the organic growth of tires," said Suh Seung-hwa, vice chairman and CEO of Hankook, in a statement.

The company said that the acquisition signals that it is expanding its business to include "software," such as distribution channels and premium services, from the traditional "hardware" of producing tires for automakers.

Hankook's deal comes after a creditor of local rival Kumho Tire said Chinese player Doublestar Tire had been picked to buy a substantial stake in the South Korean company. Kumho creditors are in talks with the Qingdao-based company over a 42% stake, reportedly worth 1 trillion won.

Analysts say that the acquisition of Jax will consolidate Hankook's presence in the Asia-Pacific market, and enhance its earnings in the long term.

"Retail networks are very important in the tire business," said Kim Jin-woo, an analyst at Korea Investment & Securities. "Hankook's decision to buy an Australian retailer is an asset for the company in the long term. Consumers change their tires every four to five years, which means investments in retail networks are worth it for the growth."

Hankook says it hopes to learn from Jax's modern retail shops to help improve its own T-Station chain. The company says that the Australian retailer's contemporary exterior and friendly service draws customers to its 83 shops. "Unlike ordinary tire stores, Jax Tyres stores are transparently open, similar to a luxury car dealership," said Hankook.

Hankook shares extended gains on Thursday, rising 1.86% to 60,300 won, after jumping 4.6% the previous day when the acquisition was announced. The stock is approaching its one-year high of 63,900 won. The benchmark Kospi slipped 0.46% to 2,071.01.

Hankook is South Korea's largest tire-maker whose customers include local automakers such as Hyundai Motor and Kia Motors as well as German carmakers. The company produced 94 million tires in 2015 with 6.4 trillion won of sales globally. Its 2016 data will be available on Friday.

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