CATEGORIES: Overseas M&A
LEGAL COUNSEL: AllBright Law Offices represented Doublestar as lead legal counsel while Bae Kim & Lee was its South Korea counsel. Lee & Ko was legal counsel to Kumho Tire. Clifford Chance was responsible for antitrust clearance outside China and South Korea.
KEY POINTS: Doublestar Group reached a consensus with Kumho Tire’s Korea Development Bank-led consortium of creditors. Pursuant to the consensus, Doublestar would build 45% controlling stake in Kumho Tire through a capital increase with the aim of making joint efforts to develop the South Korean tyre-maker. The capital increase amounted to about RMB4 billion (US$580 million).
According to AllBright, the project covered multiple jurisdictions, such as South Korea, China, the US, Vietnam and Australia. In addition to industry-specific, legal, financial and other professional concerns, also affecting the project were economic, political, cultural, and social factors in China and South Korea. After being on the edge of termination, the project did not reach closing until two differently structured transactions were completed.
As part of the first transaction, under which Doublestar Group acquired the existing shares of Kumho Tire from the latter’s creditors, an equity-transfer agreement was signed in March 2017 between Doublestar Group and the transferring creditors. However, in September 2017, Doublestar Group and the creditors announced that they had to terminate this agreement without further liabilities due to the decline in Kumho Tire’s results for 1Q and 2Q 2017, which triggered the valuation adjustment mechanism.
In the second transaction, commencing in March 2018, Kumho Tire’s creditors decided to reintroduced Doublestar Group as the major shareholder through a capital increase. Doublestar Group eventually took control of a 45% equity interest in Kumho Tire after buying new shares the latter had issued for a price of about RMB4 billion. However, the project got into difficulties again due to strong protests from the trade union of Kumho Tire. Fortunately, the project eventually reached closing after consent from the trade union owing to efforts of the parties concerned.
Read more: Deals of the Year 2018
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