Lee Jejung, Vice Chairman of Korea Zinc, "If MBK Acquires, Engineers Will Resign... Certain Technology Will Transfer to China" [Q&A]

"Many Technologies Worth Tens of Billions"
"Advisor Jang Is the Cause of Conflict... Handling of Korea Zinc Waste Disposal Site"

Lee Je-jung, Vice Chairman of Korea Zinc, along with key technical personnel at Korea Zinc, strongly opposed the transfer of management rights to MBK Partners, stating they would quit the company if that happened. They also expressed concern that Korea Zinc's unique technology, built over 50 years, could fall into Chinese hands.

At a press conference held on the morning of the 24th at Korea Zinc's headquarters in Jongno-gu, Seoul, Vice Chairman Lee emphasized, "MBK Partners can never manage Korea Zinc," adding, "If the management rights are transferred, all our technicians will quit."

He likened factory management to weeding. Just as farmers look over their fields daily and pull out weeds to ensure smooth farming, managing a factory smoothly requires daily meticulous attention. Vice Chairman Lee said, "Korea Zinc as it is today was born from 50 years of daily weeding management," and pointed out, "MBK Partners cannot manage in such a way."

Lee Jejung, Vice Chairman of Korea Zinc, is expressing opposition to the public tender offer at a press conference regarding the management rights dispute with MBK and Youngpoong held on the 24th at Korea Zinc in Jongno-gu, Seoul. Photo by Jo Yongjun

Vice Chairman Lee claimed that the current conflict between Korea Zinc and Youngpoong began with environmental issues at Youngpoong's Seokpo Smelter. At that time, industrial waste from the Seokpo Smelter caused cadmium and arsenic to be detected in the Nakdong River, leading to the arrest of executives including the CEO. Advisor Jang tried to resolve this by processing the waste at Korea Zinc's Onsan Smelter, but Chairman Choi Yun-beom blocked this, which started the deterioration of their relationship.

He also stated that the relationship did not sour because of Chairman Choi Yun-beom. Vice Chairman Lee explained, "Chairman Choi is not just an ordinary professional manager but also has the highest level of technical understanding," adding, "He possesses both technical and professional management skills, so the idea that the relationship was disrupted because of Chairman Choi is Advisor Jang's opinion."

Regarding the current public tender offer, he expressed concern that technology might be transferred overseas. Vice Chairman Lee emphasized, "Speculative companies see only money, but Korea Zinc has a lot of technology to sell off. There are technologies worth several hundred billion won, and hundreds of such technologies exist in each process," adding, "If MBK acquires management rights, they will obviously sell to Chinese capital, and that would be a disaster."

Below is a Q&A with Vice Chairman Lee.

Lee Jejung, Vice Chairman of Korea Zinc, along with executives and employees, are shouting slogans opposing the public tender offer at a press conference regarding the management rights dispute with MBK and Young Poong, held on the 24th at Korea Zinc in Jongno-gu, Seoul. Photo by Jo Yongjun

Youngpoong claims that the conflict with Korea Zinc began after Chairman Choi Yun-beom took office. What do you think is the fundamental cause of the current conflict?

▶Youngpoong and Korea Zinc maintained a partnership for a considerable period. I believe the conflict started with environmental issues at Youngpoong's Seokpo Smelter about 4 to 5 years ago. Industrial waste containing cadmium from the Seokpo Smelter flowed into the Nakdong River, causing controversy. It was a serious situation with CEO Park Young-min and other executives being arrested. However, Advisor Jang wanted to handle that waste through Korea Zinc's Onsan Smelter. Storing waste from another company's factory is embezzlement and a criminal act, and Chairman Choi Yun-beom blocked this. That was when the relationship began to deteriorate.

Earlier, when reading the press release, you said you have clear evidence that Youngpoong is trying to turn Korea Zinc into a waste disposal site. Were there other attempts to unfairly shift management burdens?

▶I want to disclose it here, but I will explain later. I should have revealed it earlier, but Chairman Choi, being a partner, stopped me, saying how could I do that. That’s the kind of person he is.

Can you also explain the allegations related to the One Asia Fund or Ignio investments raised by MBK and Youngpoong?

▶As the head of technology, I will explain as much as I know. The One Asia Fund was a simple financial investment. At that time, we had about 2.5 trillion won in cash, and One Asia Fund was one of the diversified investments. Ignio’s main purpose is to preprocess and separate resources and waste materials in the U.S. market. This was approached from a long-term perspective, considering future value. As a technician, I attended the investment review committee and examined everything carefully, judging it would be profitable. We invest with a long-term view. Please wait a little longer.

Although both are in the non-ferrous metal smelting business, where do you think the performance gap between Youngpoong and Korea Zinc comes from?

▶I think it mainly comes from management capability and technical ability. Among management capabilities, employee management is the most important. Chairman Choi treats people like family. I will compare the factory to a chili pepper field. If the owner of the chili field does not remove weeds daily, the farming fails. That is field management. It requires interest, visibility, and dedication. Korea Zinc’s operating profit margin over the past 10 years is 12.8%. Since the raw materials we handle are not produced domestically at all, this is an impossible feat. On the other hand, Youngpoong’s average operating profit over the past 10 years has been negative. They have been able to operate so far by receiving dividends from Korea Zinc.

If this merger and acquisition proceed, in what specific areas do you think Korea Zinc’s competitiveness will decline?

▶The biggest concern is the leakage of technology overseas. We have continuously updated technology for 50 years. Korea Zinc performs 12 types of non-ferrous smelting, while Youngpoong only does two. Although we used to jointly purchase raw materials and jointly sell products in the same non-ferrous smelting business, the gap widened due to differences in management and technology. Speculative companies see only money, but Korea Zinc has a lot of technology to sell off. There are technologies worth several hundred billion won, and hundreds of such technologies exist in each process. We have the ability to change operations according to various situations, such as buying raw materials cheaply and reducing processing costs. This ability to adapt for maximum profit is possessed only by our employees. We believe MBK Partners will obviously sell to Chinese capital. The leakage of this technology to China would be a disaster. Korea Zinc is a key industry. In the 21st century, national future depends on technology security, and we must protect technology from leaving Korea. This is a message not only for our company but also for our country.

Is there a possibility that Chairman Choi Yun-beom will also hold a press conference?

▶I believe he will at an appropriate time. From Chairman Choi’s perspective, he has just been hit hard by capital forces. He is not an ordinary professional manager. He is calmly responding now. We will definitely win. Please watch a little longer.