Chairman Choi "Found a Way to Win"
Visited Japan to Build Overseas Corporate Allies
Discussed Mortgage Loans with Multiple Securities Firms
The 75-year joint management system between Yeongpung and Korea Zinc is coming to an end. Centered around Jang Hyeong-jin, the largest shareholder of Korea Zinc and an advisor to Yeongpung, the Yeongpung side has made the decision to transfer management rights to MBK Partners. While relinquishing their management rights, they have chosen a 'cliff-edge strategy' to prevent the independent management of Korea Zinc Chairman Choi Yoon-beom.
If MBK Partners secures the minimum quantity set through the tender offer, Yeongpung and MBK Partners will hold about 44% of the voting rights. Considering the shareholder meeting attendance rate, they believe there is no difficulty in exercising management rights.
Chairman Choi officially declared his intention to defend management rights against the tender offer. On the 19th, he sent a letter to employees stating, "We will do everything in our power to block MBK Partners' tender offer," and "We have identified their weaknesses and mistakes and found ways to respond."
He emphasized, "The fight against the giant capital called MBK will never be easy, and their greed will never stop easily. But let us never waver. Let us rely on each other and use our wisdom to throw stones with all our might at the forehead of Goliath standing confidently before us, knock him down, and win."
Korea Zinc also excluded the Jang family, advisors, from its special related parties on the same day, opening the way for a counter tender offer. The minimum shareholding ratio needed by Chairman Choi's side for defense is 7.63%. If they proceed with a counter tender offer, they must secure a higher price and more shares (1,445,036 shares) than MBK Partners' offer (660,000 KRW). The estimated procurement amount exceeds 1 trillion KRW. Although there is a possibility that Chairman Choi may personally intervene, the prevailing view is that it is practically difficult to handle such a huge amount of funds alone. We examined the issues that may arise in the deepening conflict between the two sides.
Chairman Choi Yoon-beom’s Counterattack Card
Chairman Choi's side is focusing on securing additional funds through stock-backed loans or finding a friendly white knight. During the recent Chuseok holiday, Chairman Choi reportedly made an urgent visit to Japan, visiting Japanese general trading companies with long-standing business relations with Korea Zinc and global companies with regional headquarters in Japan.
It is said that they have formed allies mainly among companies that have collaborated with Korea Zinc. In the letter, he stated, "We have found a way to win," which is interpreted as referring to this. Additionally, Chairman Choi is reportedly discussing funding plans with multiple securities firms. Separately from securing a white knight, Korea Zinc is also reviewing the possibility of repurchasing its own shares through Kim & Chang law firm.
Legal battles are also expected to continue for a long time. Yeongpung has filed a provisional injunction requesting inspection and copying of board meeting minutes and accounting books. In response, Korea Zinc is pursuing all possible legal procedures, including derivative lawsuits against Yeongpung management, provisional injunctions to suspend duties of Yeongpung directors, criminal complaints for breach of duty, and complaints to supervisory authorities for violations of the Capital Markets Act.
Relationship Between Yeongpung and MBK After Securing Management Rights
On the 12th, MBK Partners signed a shareholder agreement with Yeongpung to jointly exercise voting rights. If MBK Partners succeeds in the tender offer, MBK Partners will ultimately hold one more share of Korea Zinc than Yeongpung. MBK Partners will have the actual management rights of Korea Zinc, and the CEO and CFO of Korea Zinc will be appointed by MBK Partners.
Kim Kwang-il, Vice Chairman of MBK Partners (right), is answering questions from the press at a press conference related to MBK Partners' public tender offer for Korea Zinc held at Lotte Hotel in Jung-gu, Seoul on the morning of the 19th. On the left is Kang Sung-du, President of Young Poong. [Photo by Yonhap News]
Even if Yeongpung transfers management rights, it plans to cooperate with MBK Partners' management activities to prevent Korea Zinc's independence. This is because Korea Zinc accounts for an absolute proportion of Yeongpung's dividend income. Of the 172 billion KRW in dividends Yeongpung received last year, 93% (160.7 billion KRW) came from Korea Zinc. Also, Korea Zinc, the world's leading non-ferrous metal manufacturer, is a stable company generating an EBITDA of 1 trillion KRW. After Chairman Choi took office, attempts to separate Korea Zinc’s affiliates continued by increasing allied shares through various paid-in capital increases. Yeongpung chose to block this even if it meant giving up management rights.
Where Will Management Rights Go After MBK... Will Yeongpung Regain Them?
Kim Kwang-il, Vice Chairman of MBK Partners, said at a press conference on Korea Zinc's tender offer on the 19th, "If we secure management rights of Korea Zinc, we will hold them for at least 10 years," adding, "After that, I think it is desirable for a domestic large corporation to take over." The contract between Yeongpung and MBK Partners does not prohibit MBK Partners from transferring management rights back to Yeongpung.
However, Yeongpung's side believes it is premature to discuss such a situation when MBK Partners has not yet secured management rights. A Yeongpung official said, "It is a distant future that has not happened yet, so it is difficult to predict the situation at that time," and "There is no justification to talk about that now after transferring management rights to MBK."
Where Are the Management Rights of Seorin Corporation?
Changes are also expected in the board of directors of Seorin Corporation (currently KZ Trading), managed by Korea Zinc. Seorin Corporation is a key affiliate that distributes and sells non-ferrous metals overseas for Yeongpung and Korea Zinc. Until now, Yeongpung has managed it with a 33.3% stake. However, in June, Korea Zinc appointed four additional inside directors through an extraordinary general meeting, filling eight out of nine board seats with its personnel. Afterward, it changed the company name and stopped consignment transactions with Yeongpung.
Yeongpung said regarding the composition of Seorin Corporation's board, "It is a matter to be discussed with MBK Partners." However, considering that the newly appointed inside directors by Korea Zinc include Choi Min-seok, president of Steelcycle and cousin of Chairman Choi Yoon-beom, and Lee Seung-ho, CFO of Korea Zinc, there is strong speculation that changes will be made to the board composition.
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