[Click eStock] "Korea Zinc, '75 Years of Partnership' Collapses... Volatility Expected to Increase"

MBK Partners, Youngpoong, and Jang Family Shareholders' Agreement
75-Year-Long Partnership Between Choi and Jang Families Effectively Collapses
Shareholding Competition Rekindled, Likely Increasing Stock Price Volatility

The management rights dispute at Korea Zinc has entered a new phase with the involvement of private equity fund (PEF) operator MBK Partners. On the 12th, MBK Partners signed a shareholder agreement with Youngpoong, the largest shareholder of Korea Zinc, and the Jang family, agreeing to jointly exercise voting rights. Through this agreement, MBK Partners is granted a call option (purchase right) on a portion of Korea Zinc's shares, enabling them to secure one more share than the combined holdings of Youngpoong and the Jang family.

Jang Jae-hyuk, a researcher at Meritz Securities, stated on the 13th, "Currently, Youngpoong and the Jang family hold a total of 33.13% of Korea Zinc's shares, half of which are scheduled to be transferred to MBK Partners." He added, "MBK Partners emphasized that this agreement lays the foundation for changes in Korea Zinc's corporate governance." Jang Hyung-jin, an advisor to Youngpoong, remarked, "It is desirable to conclude the era of joint management by the two families that has lasted for 75 years," noting that dividing shares among the third generation for joint management is inappropriate. This reflects a strong determination to end the shareholding conflict.

Korea Zinc was founded by the late Jang Byung-hee and Choi Ki-ho and is a core affiliate of the Youngpoong Group. The Choi family has been responsible for Korea Zinc, while the Jang family has managed Youngpoong Group and its electronics affiliates. The spirit of partnership, "Youngpoong is managed by the Jang family, Korea Zinc by the Choi family," has continued for 75 years until this year. However, this alliance began to fracture starting with the third-generation leadership, and conflicts intensified between 2017 and 2019 as the Fair Trade Commission demanded improvements in chaebol governance, leading to the dissolution of circular shareholdings. As a result, the two families have come to a point of fighting over shares to secure management rights of Korea Zinc.

Currently, the shareholding battle stands with Youngpoong holding 33.13% and Korea Zinc holding 33.99%. Excluding treasury shares (2.39%) and National Pension Service shares (7.57%), the actual circulating shares amount to 22.92%. To secure a majority stake, Youngpoong needs to purchase an additional 16.87% (approximately 1.94 trillion KRW) of shares, while Korea Zinc needs to acquire an additional 16.02% (approximately 1.85 trillion KRW).

Researcher Jang said, "Depending on the financial strength and strategies of both sides, additional share acquisitions through public tender offers are expected, with Korea Zinc likely to see further purchases by white knights." He added, "As the shareholding competition reignites, short-term stock price volatility is anticipated."