MBK-Young Poong secure 5.34% stake in Korea Zinc dispute

Kim Kwang-il, Vice Chairman of MBK Partners (left), and Kang Seong-doo, CEO of Young Poong.

South Korean private equity firm MBK Partners and Young Poong Corp., Korea Zinc Inc.’s largest shareholder, secured a 5.34 percent stake in the non-ferrous metal smelting company in their tender offer to take control of the company.

It is believed that many investors had no choice but to respond to the MBK-Young Poong tender offer, which was set to close earlier, as uncertainties including the ongoing lawsuit related to the acquisition of treasury shares mount.

According to the Financial Supervisory Service‘s electronic disclosure system on Monday, a total of 1,105,163 shares (5.34 percent) were tendered during the MBK and Young Poong alliance’s tender offer for Korea Zinc, which took place from September 13th, 2024, to Monday.

Korea Zinc’s stock closed 0.13 percent lower at 793,000 won ($583.75) on Monday, below the 830,000 won tender offer price proposed by the alliance, which could explain why many investors accepted the offer. Most shareholders, on the other hand, did not reportedly respond to the tender offer for Young Poong Precision Corp., which holds a 1.85 percent stake in Korea Zinc.

With the tender offer, the MBK-Young Poong alliance gained an advantage in the battle for control of Korea Zinc. Adding the newly acquired shares to the alliance’s existing 33.13 percent stake increased its total shareholding to 38.47 percent. In terms of voting rights, its stake exceeds 40 percent, solidifying its status as the largest shareholder.

Korea Zinc’s treasury shares (2.40 percent), the shares owned by the Kyungwon Cultural Foundation (0.04 percent), and the shares tendered in Korea Zinc‘s own treasury stock buyback, which runs until September 23rd, do not carry voting rights.

“As Korea Zinc’s largest shareholder, we will do our utmost to ensure the company’s continued growth by establishing transparent corporate governance and securing management control,” MBK said on Monday.

Despite the government‘s mediation efforts, however, the confrontation between Korea Zinc Chairman Choi Yoon-beom and the MBK-Young Poong alliance seems likely to escalate into a showdown at the upcoming shareholder meeting.

The alliance is expected to convene an extraordinary shareholder meeting shortly after Korea Zinc’s treasury stock buyback ends in a move to attempt to gain control of the board.

For its part, Korea Zinc stated on the same day that “it appears that the result fell short of the target set by the MBK side. We will respond appropriately moving forward and ask for continued support from shareholders.”

This suggests the company’s intention to continue the battle for shares and votes through its own tender offer.

Given that regulatory authorities have expressed their intention to closely monitor the possibility of market manipulation or unfair trading during the tender offer, the ongoing disputes are expected to be prolonged regardless of the outcome.