'750,000 Won Barrier Unbroken' Struggling Korea Zinc Stock Price... Tepid Despite Price Increase

Korea Zinc's Stock Lukewarm Despite Tender Offer Price Increase
Market Watches for Chairman Choi Yoon-beom's Side Tender Offer
Interest Grows Whether Korea Zinc's Recent Fundraising Will Be Used for Counter Tender Offer

On the first day of MBK Partners and Youngpoong raising the public tender offer price for Korea Zinc to 750,000 KRW on the 26th, Korea Zinc closed the market at 713,000 KRW. Interest is focused on Chairman Choi Yoon-beom's counter public tender offer, but the market's response remains lukewarm.

According to the Korea Exchange on the 27th, Korea Zinc ended trading on the previous day at 713,000 KRW, up 9,000 KRW (1.28%) from the previous trading day. There is a clear difference in the stock price volatility compared to when the initial public tender offer was announced. Since MBK and Youngpoong announced the public tender offer for Korea Zinc shares on the 13th, the stock price surged from the 500,000 KRW range to over 700,000 KRW in one leap. However, after the price adjustment, it has remained steady in the 710,000 KRW range without significant fluctuations. This is far below the adjusted tender offer price of 750,000 KRW.

Although the stock price is lukewarm, MBK is not letting its guard down. They are preparing their next move under the assumption that Chairman Choi Yoon-beom's side could launch a counter public tender offer at any time. Korea Zinc has stated that it will closely monitor the moves of Youngpoong and MBK without disclosing whether it will proceed with a counter tender offer until the public tender offer period ends on the 4th of next month. Since MBK has already raised the tender offer price once, the possibility of adjusting the purchase price again and extending the tender offer period cannot be ruled out.

The market expects Korea Zinc to eventually launch a counter public tender offer and counterattack Youngpoong and MBK. In particular, the counter public tender offer price and the number of shares that Chairman Choi's side can purchase are of utmost interest. It is estimated that at least 1.1 trillion KRW in funds would be required to launch a counter public tender offer at a price higher than Youngpoong's tender offer price. Whether Chairman Choi's side can actually mobilize funds of this scale remains uncertain.

Previously, Korea Zinc broke its existing no-debt management policy and unusually issued corporate commercial paper (CP) to secure 400 billion KRW. Korea Zinc issued CP worth 200 billion KRW on the 24th and plans to raise an additional 200 billion KRW through further CP issuance on the 27th. Korea Zinc claims that this CP issuance is a "scheduled plan to secure operating funds," but the market views the funds as potentially being used as "ammunition" to defend management rights against the offensive by Youngpoong and MBK. However, if this market assumption materializes, it could trigger legal risks. A capital market official said, "If CP is issued under the pretext of operating funds and then lent to affiliates or friendly parties to be used for counter public tender offer funds, there is currently no way to prevent it in advance," adding, "Using company funds for Chairman Choi's personal defense of management rights could later become an issue of breach of fiduciary duty."

Korea Zinc is also making every effort to secure strategic allies by collaborating with overseas investors. In particular, Chairman Choi is actively seeking allies both domestically and internationally. Around the recent Chuseok holiday, Chairman Choi visited Tokyo, Japan, where he met with senior officials from BHP's Japan branch, the world's largest mining company, and reportedly also contacted the Japanese SoftBank, a global investment firm. Chairman Choi also met with Kim Dong-kwan, Vice Chairman of Hanwha Group, who is classified as a friendly shareholder of Korea Zinc.