Korea Zinc chief to launch counter-public tender offer for Young Poong

Chairman Choi Yoon-beom

Korea Zinc Inc. Chairman Choi Yoon-beom is looking to launch a “counter-public tender offer” for Young Poong Precision Corp., which holds a 1.85 percent stake in the non-ferrous metal smelting company, to protect his management control.

With South Korean private equity firm MBK Partners and Young Poong Corp., Korea Zinc’s largest shareholder, currently in the middle of a public tender offer for Young Poong Precision, which holds the key in the management control battle for Korea Zinc, Choi is stepping in to safeguard the management control of Young Poong Precision.

According to sources from the investment banking (IB) industry on Tuesday, Choi and his related parties, including close family members, are planning to publicly tender for 3,937,500 common shares of Young Poong Precision, or a 25 percent stake in the company.

The tender offer price is set at 30,000 won ($22.64) per share, which is 20 percent higher than the 25,000 won per share price offered by MBK on September 26th, 2024, and 18.5 percent higher than the closing price on the most recent trading day. The total amount of money Choi’s side will invest is 118.125 billion won, according to the sources.

The public tender offer will be conducted over 20 days, from Wednesday to October 21st, 2024. If the tender offer is successful, Choi and his related parties’ stake in Young Poong Precision will increase from 35.45 percent to 60.45 percent. Choi’s side plans to proceed with the purchase even if fewer than the target 25 percent of shares are tendered, as it could secure a majority with a stake as small as 15 percent.

Protecting Young Poong Precision is essential for Choi to defend his control over Korea Zinc, as the shares held by Choi and his allies (33.9 percent) are almost equal to the number held by the Young Poong side (33.1 percent), leaving both sides in a close contest where even a 0.1 percent difference matters.

MBK and Young Poong are aiming to acquire Young Poong Precision because ownership would give the winner an immediate 3.7 percentage point lead in the ownership stake. This is why both companies started by targeting the smaller market capitalization of Young Poong Precision in their public tender offer.

Industry insiders also focus on the court’s decision on the injunction to prohibit Korea Zinc from purchasing treasury shares, which is expected on Wednesday. The MBK-Young Poong alliance filed the injunction, arguing that the Choi side’s acquisition of treasury shares violates the principle of prohibiting related parties from acquiring such shares.

If the injunction is dismissed, Choi’s side is expected to immediately use more than 2 trillion won to purchase treasury shares. But if it is upheld, it is possible that Choi and his side will launch a large-scale counter-public tender offer for Korea Zinc instead.