Hanwha Group to provide liquidity support to Korea Zinc

Hanwha Group CI

South Korean conglomerate Hanwha Group has stepped in to support Korea Zinc Co. Chairman Choi Yoon-beom amid liquidity constraints linked to a proposed rights issue.

Hanwha Group announced on Wednesday that Hanwha Energy Corp. signed an agreement to acquire 5,436,380 Hanwha Corp. shares held by Korea Zinc through an after-hours block trade. The transaction is valued at 152 billion won ($108 million).

With the proceeds from this sale and the early repayment of 390 billion won in loans from its Australian subsidiary Ark Energy MacIntyre, Korea Zinc is expected to secure a total of 542 billion won in liquidity.

For Hanwha, this transaction is expected to bolster its control within the group by increasing its stake

Earlier, Korea Zinc’s plan to raise 2.5 trillion won through a rights issue met regulatory hurdles.

The Financial Supervisory Service (FSS) requested that Korea Zinc revise and resubmit its securities registration statement, noting that the rights issue, intended to secure funds following a buyback of its shares to fend off hostile takeover attempts, could be misleading to investors.

The FSS cited insufficient disclosures in Korea Zinc’s filing, including the rationale for the rights issue, decision-making processes, due diligence outcomes from the underwriter, subscription limits, and inconsistencies with the tender offer report.

Meanwhile, minority shareholders impacted by the rights issue are preparing legal action.

Law firm HANBYOL LAW LLC announced plans to file a lawsuit against Korea Zinc’s executives and board members, holding them accountable for damages related to the buyback and rights issue decisions.

Kanghan Law also plans to file a petition with the FSS, urging an investigation into Korea Zinc’s public disclosures and rights issue.