MBK Investment Increased by 300 Billion Won
Only 5 Trading Days Left for Tender Offer
Korea Zinc May Counterattack with Allies
The management rights dispute over Korea Zinc has escalated into a 'war of money' as MBK Partners and Young Poong raised their public tender offer prices. With only five trading days left until the tender offer deadline, Chairman Choi Yoon-beom of Korea Zinc has little time left to make a decision. Korea Zinc criticized MBK and others, saying, "Who made this decision?" and "We are once again facing legal judgment."
As of 10 a.m. on the 26th, Korea Zinc's stock price was 715,000 won, up 1.56% from the previous day. Young Poong Precision was trading at 24,800 won, up 9.01% from the previous day.
On this day, MBK's special purpose company (SPC), Korea Investment Holdings, and Young Poong issued a 'Correction to the Public Tender Offer Announcement for Korea Zinc Co., Ltd. Common Shares,' raising the tender offer price by 13.6% from 660,000 won to 750,000 won.
The public tender offer price for Young Poong Precision, which holds a 1.85% stake in Korea Zinc, was also raised from 20,000 won to 25,000 won (25%). Previously, MBK announced it would publicly tender for 6.68% to 14.61% of Korea Zinc's shares and up to 43.43% of Young Poong Precision's shares.
The amount MBK is investing has increased. Based on the maximum tender offer volume, the amount rose by about 300 billion won from the previously announced 2.1332 trillion won to 2.4396 trillion won. Young Poong provided funds to MBK, which was ultimately support considering the tender offer price increase.
This day is the last day MBK can raise the price without extending the tender offer period. The tender offer ends on the 4th of next month, based on business days.
Chairman Choi has five trading days left to respond. Korea Zinc is expected to accelerate efforts to secure a white knight.
Korea Zinc is known to have contacted Korea Investment & Securities, Japan's SoftBank, and the U.S.-based private equity firm Bain Capital. If the stock price falls below the tender offer price, Korea Zinc is likely to launch a counter tender offer with allies.
There is also the option of a private equity firm directly stepping in. A private equity firm could act as Chairman Choi's white knight by acquiring a significant stake on the market and becoming a major shareholder, potentially causing the tender offer to fail. However, the lack of clear exit strategies for future investments is a weak point. Additionally, Korea Zinc issued 200 billion won worth of commercial paper (CP) on the 24th and plans to raise another 200 billion won through additional CP issuance on the 27th.
A Korea Zinc official criticized, "Young Poong has two CEOs detained, no inside directors, and the chairman of the board position is vacant. After deciding to hand over Korea Zinc shares to MBK, they even took out a 300 billion won loan to lend, which is an unbelievable decision. Who exactly made such a decision? What were the outside directors doing during this reckless decision-making process? We are once again facing legal judgment."
He added, "Korea Zinc's management, key technical staff, and workers strongly oppose the increase in the tender offer price. The more money spent, the harder it will be for Korea Zinc to make long-term investments and grow its core personnel, technology, and assets," he rebutted.
In the related industry, voices comparing the management performance of Korea Zinc and Young Poong have also emerged. Although MBK and Young Poong are pushing the tender offer claiming they will improve Korea Zinc's damaged governance and corporate value, Korea Zinc's performance is actually on an upward trend.
Young Poong's sales increased from 2.6154 trillion won in 2015 to 4.4295 trillion won in 2022 but fell back to 3.7617 trillion won last year. Profitability worsened further. Since 2015, Young Poong has recorded operating losses in more than half of the years, including a 43.1 billion won operating loss in the first half of this year.
On the other hand, Korea Zinc's sales grew from about 5.7 trillion won in 2015 to 11.2194 trillion won in 2022. Although sales retreated to 9.7045 trillion won last year, they are expected to recover to 10 trillion won this year. Operating profit surpassed 1 trillion won in 2021, dipped to 659.9 billion won last year, but rebounded with 453.2 billion won recorded in the first half of this year.
An investment banking industry official pointed out, "Even if the Korea Zinc management rights dispute ends with the success of Young Poong and MBK, it is questionable whether they have the management capabilities to justify it."
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