China’s state-run China National Chemical Corporation (ChemChina) has joined the bid for South Korea’s Kumho Tire Co., suggesting major Korean manufacturers could become latest target in Chinese relentless shopping spree of foreign businesses.

Industry sources said ChemChina has signed a non-disclosure agreement (NDA) with creditors of Kumho Tire last month and began preparing for an official bid. The Chinese company selected Boston Consulting Group to advice on the deal.

A NDA would allow access to corporate information and set the stage of a M&A process. The company must beat Kumho Asiana Group Chairman Park Sam-koo who has the rights of first refusal, in the price bid in the preliminary tender in November. Park yielded management right in the tire company, but has the right of first refusal, or the priority to reclaim the management control under the same terms with the highest bidder.

The tire industry and the investment banking industry predict that the Chinese company would bid aggressively, given the strong pitch in M&A campaign by Chinese state enterprises and burgeoning tire demand in China.

“ChemChina could offer a price Park cannot dream of matching, and creditors will be happy to get a good price for the company,” said an official of the investment banking industry.

The government-owned chemical company emerged as a M&A heavyweight, purchasing Syngenta AG, Switzerland-based seed and pesticide company, in February at record value of $43 billion in February. In May last year, it bought a majority stake in Italy-based Pirelli, the world’s fifth largest tire maker.

A total of a 42.01 percent stake, or 66,368,844 shares, in Kumho Tire would be up for sale, and Credit Suisse is leading the sale on behalf of the creditors.

The preliminary auction is expected to take place next month and the final event early next year. The company plans to finalize the sale process within the first half of next year.

By Chun Beom-joo

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