Double Star Tyres, a Chinese tire maker, has been selected as a preferred negotiator for South Korea’s Kumho Tire Co. and eligible to pit against Kumho Asiana Group Chairman Park Sam-koo who has the priority right over Korea’s second largest tire maker should he come up with higher price.

According to investment bank sources on Monday, Double Star Tyres beat two other Chinese contenders Shanghai Aerospace Industry (SAIC) and Jiangsu GPRO Group for a 42.1 percent stake held by creditor banks in Kumho Tire. But it would have wait until Kumho Asiana Group Chairman Park Sam-koo gives up his right to buy back the stake at a higher price.

Sources said Double Star offered a bid of around 1 trillion won ($846 million), which is known to be a similar amount to what rival SAIC offered in preliminary bidding, but creditors eventually chose Double Star considering its association with tire business.

If the deal is sealed, it would mark the first M&A by a Chinese company after the conflicts brewed between Seoul and Beijing over the deployment of U.S. antimissile Terminal High Altitude Area Defense (Thaad) in South Korea. Sources said deal advisor Credit Suisse actively encouraged Chinese contenders to stay in the bid until the last minute.

Double Star ranks 30th in worldwide tire production with two plants in Qingdao and Xian and it could jump to 10th place after acquisition with Kumho, which runs plants in Nanjing and Tianjin in China.

Double Star raised a 1.7 trillion won ($1.4 billion) fund to join the bid. Creditors are due to sign a share purchase agreement with Double Star sometime in mid-February and inform Kumho Asiana Group Chairman Park of its final price and other conditions. Park is obliged to let the creditors know whether he will outbid the price or give up his right within 30 days.

Park eager to redeem the company his father founded to build Kumho business group said in a previous interview that he would find means to buy back the controlling stake even if price exceeds 1 trillion won.

By Hong Jang-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]