(Adds stake value, updates share price, paragraphs 3-4)
SEOUL, Jan 28 (Reuters) - Global tyre maker Michelin said on Tuesday it would buy a 10 percent stake in South Korea's Hankook Tire to establish a strategic alliance.
Hankook is one of the largest tyre makers in South Korea, which ranks as the world's fifth-largest producer of automobiles behind the United States, Japan, Germany and France.
Michelin declined to give the value of the planned stake purchase, but a spokesman for Hankook Tire estimated it at 38.5 billion won ($33.17 million) based on Tuesday's closing share price.
Shares of Hankook Tire shot up almost five percent to close 2,570 won on the news, outperforming a 1.26 percent rise on the broader market .
"This agreement allows the two companies to exploit synergies in a search for common opportunities to develop their respective positions in the tyre market," the French tyre maker said in a statement.
The partnership agreement signed in Seoul on Tuesday involved cooperation in research and development, manufacturing and distribution.
Hankook would also be licensed to produce Michelin's PAX-run-flat tyre technology as part of the agreement.
A Hankook spokesman said this technology would allow a car to run for some time even after the tyres have been punctured because the tyres would be able to retain a certain amount of pressure.
Michelin said the two parties would continue to discuss the precise scope and terms of the alliance.
(US$1 = 1,160.6 Won)