Korea Zinc’s trading volume hits 20-yr high as takeover bid intensifies

(Yonhap)

Korea Zinc Co.’s stock trading volume soared after MBK Partners Ltd. increased its tender offer price to 830,000 won ($617) per share last week.

According to the Korea Exchange on Sunday, Korea Zinc’s stock volume hit 1,230,027 shares on Friday, accounting for 5.9 percent of the total outstanding shares. This marks the highest trading volume for the company in 20 years.

The resolution of uncertainty, driven by MBK’s commitment to fully acquire all shares tendered during the offer, spurred this increase in trading activity.

Currently, a fierce battle for control of Korea Zinc is underway.

The MBK-Young Poong alliance has committed up to 2.5 trillion won to purchase as much as 14.6 percent of Korea Zinc shares, while Korea Zinc Chairman Choi Yoon-beom and Bain Capital have set aside up to 3.1 trillion won to acquire 18 percent.

Both parties are offering 830,000 won per share in their tender offers.

From September 13 to October 4, the total trading volume of Korea Zinc stock was 5,111,731 shares, amounting to 24.7 percent of the company’s total shares.

Given that 23 percent of Korea Zinc’s shares are in circulation, excluding stakes held by Chairman Choi and his allies (33.9 percent), MBK-Young Poong (33.1 percent), the National Pension Service (7.5 percent), and treasury stock (2.4 percent), there has been almost a complete turnover of the stock during the tender offer period.

The total trading value during this period amounted to more than 3.67 trillion won.

Pension funds (207 billion won) and individual investors (67 billion won) were net sellers, while foreign investors (88 billion won), private equity funds (96 billion won), and financial investors (66 billion won) were net buyers.

Given the tax implications, industry insiders noted that it would be more advantageous for individuals to follow Korea Zinc, while foreign corporations benefit more from following MBK. Individual investors face dividend income tax when selling to Korea Zinc, and capital gains tax when selling to MBK Partners.

Foreign investors have been buying while individual investors have been selling, which currently favors MBK during the tender offer period.

Attention is now focused on whether MBK Partners and Chairman Choi will make any additional counterattacks.

The legal tensions surrounding the takeover have also intensified.

On September 26, Young Poong Precision, an ally of Chairman Choi, filed an injunction with the Seoul Central District Court.

The company is seeking to prevent the execution of management cooperation and loan agreements between MBK and Young Poong adviser Chang Hyung-jin until the final ruling on allegations of breach of fiduciary duty is reached.

Young Poong Precision claims that the transfer of Korea Zinc, a key asset, to MBK constitutes a “breach of fiduciary duty.”

Young Poong Precision has claimed that Young Poong’s transfer of its core asset, Korea Zinc, to MBK constitutes a “tortious contract.”