Korea Zinc withdraws controversial rights offering plan

Choi Yoon-beom, Chairman of Korea Zinc, greets after a press conference at the Korea Chamber of Commerce and Industry in central Seoul on the 13th. (Yonhap)

South Korean non-ferrous metal smelting company Korea Zinc Co. withdrew its 2.5 trillion won ($1.78 billion) rights offering plan on Wednesday.

Korea Zinc Chairman Choi Yun-beom held a press conference in central Seoul on Wednesday, where he officially apologized for the controversy surrounding the company’s general shareholder rights offering plan.

“I take it very seriously that we failed to fathom the feelings of our existing shareholders,” Choi said.

Korea Zinc held an emergency board meeting earlier in the day and resolved to withdraw the public rights offering.

The decision came after the Financial Supervisory Service requested a revised report, raising questions.

Choi also announced plans to reform the governance structure and relinquish his chairmanship of the board of directors to ensure that the board can maintain its robust oversight during the press conference.

“We will strengthen the board’s independence by having an external director serve as chairman, and I will soon step down from the chairmanship and continue to work for Korea Zinc as an ordinary director,” he said.

Korea Zinc has separated the roles of CEO and board chair as part of its environmental, social, and governance (ESG) management approach, with the chair eligible to serve as board chair per company regulations.

By proposing governance reform, Choi appears to be taking a preemptive step to increase board independence, while addressing external criticism regarding his dual roles with a minority shareholding. He also announced plans to implement an “open governance and management structure” that promotes practical ownership openness.

An example of this is the introduction of a “Majority of Minority” (MOM) system, where decisions affecting major shareholder interests would require the approval of non-controlling shareholders, including institutional investors and minority shareholders, via a voting process excluding the controlling shareholders.

“Considering the limited influence of minority shareholders in corporate management, we plan to incorporate the MOM system into our regulations,” Choi said.

Despite the setback in share acquisition, Korea Zinc remains determined to prevent MBK Partners and Young Poong Co. from securing management control, expressing a strong commitment to leverage the upcoming shareholder meeting.

“We hope shareholders will make wise decisions at the upcoming shareholder meeting, where shareholder composition will be finalized, taking into account the company’s long-term competitiveness, vision, and future business partnerships over short-term gains,” Choi said.

Meanwhile, MBK Partners released a statement criticizing Choi’s announcement on the same day.

“Choi has made it clear that he will continue to serve as company chairman while stating his intention to step down from the board chair position,” the statement said. “If an external director recommended by Choi becomes board chair, it would likely diminish, rather than enhance, board independence, and reduce the board to a mere rubber stamp.”