[Korea Zinc vs Yeongpung] Yeongpung Advisor Who Missed One Korea Zinc Board Meeting Opposes New Business Capital Increase

Jang Hyeong-jin's Side Urges Prevention of Share Dilution from Third-Party Paid Capital Increase
Choi Yoon-beom's Side Lacks Shares Despite Management Rights... Investment Funds Also Crucial

Editor's NoteAfter 75 years of partnership, Korea Zinc and Young Poong are now engaged in a battle for management rights. They are clashing over dividends in shareholder meetings and even resorting to legal disputes to regain control of their affiliate, Seorin Corporation. Analysts suggest that the conflict stems from differing management philosophies between the two leaderships. The problem is that this dispute could harm not only other companies but also innocent investors. This article aims to examine the multifaceted impact of the conflict between Korea Zinc and Young Poong.

The joint venture between the two families under one roof?Jang Byeong-hee (Jang family) and Choi Ki-ho (Choi family)?is widely regarded as having crossed the Rubicon. Jang Hyeong-jin, an advisor at Young Poong, and Choi Yoon-beom, chairman of Korea Zinc, are locked in a vote battle at the shareholders' meeting and are even willing to engage in legal battles, indicating that the situation has passed the point of no return. What is causing the dispute between Advisor Jang and Chairman Choi?

Choi Yoon-beom, Chairman of Korea Zinc (left), Jang Hyung-jin, Advisor of Young Poong (right)

According to electronic disclosures on the 29th, Jang Hyeong-jin, born in 1946 and son of Honorary Chairman Jang Byeong-hee, attended 12 out of 13 Korea Zinc board meetings last year. However, he did not attend the board meeting that resolved the “third-party allotment paid-in capital increase,” which is central to the management rights dispute. While he agrees with the direction of the new business “Troika Drive” promoted by Chairman Choi, he does not agree with the method.

From Advisor Jang’s perspective, he must prevent dilution of the shares held by himself and his family due to the capital increase. A Young Poong official said, "If the purpose is to attract investment or to cooperate, there are many other ways. Claiming the need for assets while diluting the entire shareholders’ equity to run the business is just an excuse and appears only as a means to secure friendly shares."

Meanwhile, the performance of Young Poong, where he and his eldest son Jang Se-jun (16.89%) and second son Jang Se-hwan (11.15%) are the largest shareholders and related parties, has plummeted. Young Poong’s operating profit fell sharply from a 46.7 billion KRW surplus in 2020 to a 26.8 billion KRW deficit in 2021. Last year, the deficit widened to 169.8 billion KRW.

The main business site, Seokpo Smelter, has also been embroiled in serious accidents and environmental pollution controversies. The Daegu District Prosecutors’ Office is investigating officials on charges that the Seokpo Smelter polluted the surrounding environment.

On the other hand, Choi Ki-ho, born in 1975 and grandson of Honorary Chairman Choi Ki-ho, holds management rights at Korea Zinc but lacks sufficient shares. To increase his insufficient stake, Chairman Choi purchased 8,700 shares of Korea Zinc this month, raising his personal shareholding to 1.82%. However, this is still insufficient compared to Advisor Jang’s 3.63%. Also, as he pushes forward with Troika Drive, large-scale investment funds are urgently needed. This inevitably leads to conflict with the Jang family, who desire steady dividends from Korea Zinc.

Chairman Choi also bears the responsibility of leading the Choi family. The “cousin management” system is solidifying, with key figures such as Choi Nae-hyun (son of Honorary Chairman Choi Chang-young), chairman of Kemco, Choi Joo-won (son of Young Poong Precision Chairman Choi Chang-gyu), CEO of Arc Energy, and Choi Min-seok, president of Steel Cycle (son of Honorary Chairman Choi Chang-geun) positioned within Korea Zinc’s affiliates.

A business insider familiar with Korea Zinc’s situation said, "It seems Chairman Choi realized that his thoughts differ from the Jang family during the process of preparing alternatives for the sustainability of existing businesses, rather than from the beginning intending to manage independently."

Recently, Chairman Choi stepped down as CEO of Korea Zinc after six years since his appointment in 2019. A Korea Zinc official explained, "Since he still holds the chairman position and the role of board chairman, there is no change in management rights."