Money → Legitimacy → Business Circles → Political Sphere... Expanding Scope of Korea Zinc Management Dispute

2 Trillion Won Scale Tender Offer 'War of Money'
Battle of Justifications Including 'Investment Breach of Duty and Market Manipulation Suspicions'
Political Backers Entering, Adding Weight to 'Social Responsibility'

The management rights dispute over Korea Zinc, which has been a tug-of-war for years, is rapidly escalating as MBK Partners has joined the Yeongpung side as a white knight. The conflict between the Yeongpung-MBK alliance and the current management of Korea Zinc has expanded with the involvement of local communities and political circles. Attention is also focused on the future responses of major business groups such as Hyundai Motor, LG, and Hanwha, who are major shareholders of Korea Zinc, as well as the participation of the National Pension Service and minority shareholders in the tender offer.

Chairman Choi Yoon-beom's Korea Zinc side 1 trillion KRW vs Yeongpung-MBK side 2 trillion KRW 'Share Acquisition Battle'

In the 'War of Money,' the Yeongpung-MBK alliance holds the advantageous position. MBK Partners and Yeongpung have been conducting a tender offer from the 13th of this month until October 4th, purchasing Korea Zinc shares at 660,000 KRW per share, acquiring at least 1,445,036 shares (6.98%) up to a maximum of 3,024,881 shares (14.61%). If the tender offer is successfully completed, the Yeongpung and MBK side's stake is expected to increase to a maximum of 47.7%. Excluding treasury shares without voting rights, the shareholding ratio will secure a majority at 52%. The required funds amount to up to 2 trillion KRW. The special purpose company (SPC) Korea Corporate Investment Holdings, which MBK is using for this tender offer, is based on the 6th blind fund. The fund size is reported to be about 8 trillion KRW. Although additional funds may be needed due to possible increases in tender offer price depending on stock price trends, if within the calculated range, funding is not expected to be an issue. The minimum Korea Zinc shareholding ratio that Chairman Choi's side must secure to defend management rights is 6.05%, approximately 800 billion KRW. This assumes that the chairman's side's 15.9% stake is supported by white knights such as Hyundai Motor, Hanwha, and LG Chem. If the situation changes, larger funds will be required to defend management rights. There is skepticism about securing funds if Chairman Choi launches a counter tender offer. A senior MBK official said, "The tender offer is not a process to distinguish good people from bad but an objective judgment on whether it is better to respond to the tender offer now or just hold the shares, considering investment returns."

National Key Industry 'Predatory M&A' vs Current Management's 'Investment Breach of Fiduciary Duty Allegations'

The battle for legitimacy is as fierce as the 'War of Money.' On the 18th, Park Ki-duk, President of Korea Zinc, officially expressed opposition to the Yeongpung-MBK tender offer. Korea Zinc has claimed that Yeongpung has violated environmental laws and the Serious Accident Punishment Act and has not been recognized for management capability due to large-scale deficits. They argue that Yeongpung has neglected corporate social responsibility and has been solely focused on acquiring Korea Zinc's shares and management rights in collusion with 'predatory capital.' They emphasized that if private equity funds like MBK Partners acquire Korea Zinc's management rights, it could disrupt core strategic businesses such as secondary battery materials and significantly damage shareholder value. President Park stated, "This tender offer attempt is judged as a hostile, predatory M&A by corporate raiders against a company with the world's number one market share competitiveness in the non-ferrous metals sector, a national key industry." He accused MBK Partners of "engaging in predatory management by acquiring market-competitive companies domestically multiple times, then selling off core assets or excessively receiving dividends to recover investments." He also mentioned, "MBK Partners is known to hold call options on shares of Yeongpung and its special related parties, and it is highly likely that the predatory capital-backed tender offerors will acquire our management rights and then resell them to foreign capital." He criticized the major shareholder Yeongpung for "operating the Seokpo smelter and causing various environmental pollution damages, inflicting significant harm on local residents and the Nakdong River basin." President Park concluded, "This tender offer is likely to negatively impact our company's mid- to long-term corporate value and seriously harm the interests of stakeholders, including minority shareholders," and said they are thoroughly preparing to resolve the situation.

On the same day, MBK also stated in a press release that the stock tender offer is intended to strengthen the management rights of the current largest shareholder, Yeongpung, and is not a hostile act or management rights takeover. MBK said, "The tender offer is clearly to strengthen the management rights of the largest shareholder, the first major shareholder, and considering the share gap between the Jang and Choi families, the claim of hostile M&A is groundless." According to MBK, the share difference between the two families has been over 15 percentage points for more than 20 years. The gap widened to 31.73 percentage points in 2002, narrowed to a minimum of 16.75 percentage points after 2022, but recently the Yeongpung and Jang family shares have increased again, widening the gap. Currently, Yeongpung and the Jang family own 33.1% of Korea Zinc shares, more than twice the Choi family's 15.6%, MBK explained. MBK also emphasized that Korea Zinc is an affiliate of the Yeongpung Group. MBK stated, "Yeongpung and Korea Zinc are affiliates of the large business group Yeongpung Group, headed by Advisor Jang Hyung-jin, under the Fair Trade Act," and asserted, "The affiliate separation claimed by Chairman Choi's side is practically impossible." MBK said that the stakes held by Hyundai Motor, Hanwha, LG, and other large corporations are not friendly shares for Chairman Choi, explaining, "If they were friendly shares, they would have disclosed joint exercise of voting rights with Chairman Choi as major shareholders acting jointly, but these companies have only disclosed business partnerships and have not revealed joint actors." The biggest variable is whether legal risks arise for the current management of Korea Zinc. Yeongpung has filed a provisional injunction with the court to inspect and copy accounting books, raising allegations against Chairman Choi of breach of fiduciary duty related to One Asia Partners investment, involvement in SM Entertainment stock price manipulation, and suspicions of high-price purchases of Ignio.

Ulsan Politicians Support Korea Zinc's Current Management... MBK: "Domestic Fund, Not Chinese Capital... We Will Fulfill Social Responsibility by Creating Local Jobs"

During the Chuseok holiday, the Korea Zinc management rights dispute expanded beyond capital market logic and industrial interests to local communities and political circles. Politicians from Ulsan, where production facilities are located, actively supported Korea Zinc. On the 18th, Ulsan Mayor Kim Doo-gyeom held a press conference stating, "If management rights transfer to MBK, there is a risk that Korea Zinc could be sold to a Chinese company," adding, "Considering that private equity funds primarily aim for high returns in a short period, there is a possibility of reduced R&D investment, core personnel outflow, and overseas sales after acquisition." Mayor Kim also proposed a 'Buy Korea Zinc Shares Movement.' He said, "About 20 years ago, when SK had a management rights dispute with a foreign hedge fund, Ulsan citizens carried out a 'One SK Share Movement' to prevent it," and added, "I hope the 1.2 million citizens of Ulsan will show their strength by participating in the 'Buy Korea Zinc Shares Movement' this time as well." Mayor Kim mentioned, "We will actively communicate with the government and the National Assembly to prepare effective countermeasures and, if necessary, directly appeal to the Presidential Office." The day before, Park Hee-seung, a member of the Democratic Party, issued a press release expressing strong concern over MBK's hostile M&A attempt on Korea Zinc and stated, "We will question the selection process of MBK's entrusted management company during the national audit." Park said, "Korea Zinc is a national key industry and strategic industry, producing zinc, called the rice of industry, and various basic materials for industries," adding, "It is a company at the center of the de-China value chain in the secondary battery sector, collaborating with Hyundai Motor, LG, Hanwha, and others, and has been established in Ulsan for 50 years, continuously creating jobs and contributing to the local community." He argued, "There are claims that MBK is attempting a hostile M&A on Korea Zinc backed by Chinese capital," and warned, "If Chinese capital and related companies acquire Korea Zinc, its unique technology could be leaked overseas, and the departure of core personnel could accelerate."

In response to these claims, MBK and Yeongpung, the largest shareholders of Korea Zinc, rebutted. They emphasized, "MBK was established in 2005 and is a 'domestic private equity fund' supervised by domestic financial authorities, not a Chinese fund," and "Limited partners (LPs) investing in MBK funds are leading domestic and global pension funds and financial institutions, and it is not true that Chinese capital constitutes the majority." They also addressed concerns about damage to national key industry competitiveness, pledging to maintain employee employment as before and help Korea Zinc reestablish itself as a Ulsan-based company. MBK and Yeongpung plan to hold a press conference on the morning of the 19th at Lotte Hotel in Jung-gu, Seoul, to explain the background and position regarding the current tender offer.

Meanwhile, Korea Zinc, an affiliate of Yeongpung Group, has been operated by descendants of the co-founders, the late Jang Byung-ho and Choi Ki-ho. The Jang family manages Yeongpung Bookstore and electronics affiliates, while the Choi family manages non-ferrous affiliates including Korea Zinc. The dispute over shares began in 2022 when the third-generation founder Chairman Choi led a paid-in capital increase, and the conflict intensified when Yeongpung opposed the agenda at the shareholders' meeting last February.