Korea Zinc Breathes New Life with Treasury Stock Buyback... Launches Counterattack through Tender Offer

Court Dismisses Lawsuit Banning Treasury Stock Acquisition
Company to Convene Board Meeting to Approve Purchase Plan
High Possibility of Public Tender Offer for Treasury Stock Starting on the 4th
All Acquired Treasury Stock to Be Cancelled as a Strategic Move

Choi Yoon-beom, chairman of Korea Zinc, is beginning to reveal strategies to counter the tender offers from Youngpoong and MBK Partners. Following the court's dismissal of the injunction request prohibiting the repurchase of treasury shares, Korea Zinc plans to immediately buy back its own shares to defend its management rights.

According to legal and industry sources on the 2nd, the injunction lawsuit filed by Youngpoong against Korea Zinc to prohibit the acquisition of treasury shares was dismissed. Previously, Youngpoong had filed an injunction request with the court to prevent Korea Zinc from acquiring treasury shares during the tender offer period, but the court did not accept it.

As a result, Korea Zinc now has the path open to start a tender offer for its treasury shares on the closing date of the tender offer, the 4th. Korea Zinc is expected to proceed with the repurchase of treasury shares at a price in the 80,000 KRW range, exceeding the 75,000 KRW tender offer price proposed by Youngpoong and MBK Partners.

Korea Zinc plans to finalize specific details related to the treasury share tender offer at a board meeting scheduled for the morning of the same day. Korea Zinc is reported to have secured over 2 trillion KRW in liquidity, including 400 billion KRW raised through the issuance of commercial paper (CP) for this treasury share repurchase. Depending on the situation, it is also said to be considering conducting the tender offer in cooperation with the global private equity fund (PEF) Bain Capital.

Earlier, Korea Zinc clearly expressed its intention to defend its management rights through treasury share repurchases regardless of the injunction lawsuit outcome. Even before the injunction result was announced, it convened a board meeting to concretize strategies for defending management rights. The reason for convening the board meeting in advance is analyzed to be an attempt to check shareholders from responding to the tender offers by Youngpoong and MBK.

Korea Zinc has made a bold move by declaring that all acquired treasury shares will be canceled. This treasury share acquisition is not aimed at securing voting rights through exchanges with friendly companies but is intended to enhance shareholder value in the long term through cancellation. Treasury shares do not have voting rights, but if sold to friendly forces, voting rights arise, which could expand friendly stakes. Korea Zinc made it clear that this is not a management defense strategy through stock exchanges with specific companies.

However, MBK has pointed out that Korea Zinc’s high-priced treasury share repurchase may constitute a breach of fiduciary duty. In particular, announcing a plan to repurchase treasury shares during the tender offer period raises suspicions of market manipulation. MBK warned, "The very idea of spending trillions of won of company money to protect one’s management rights is a serious breach of fiduciary duty," adding, "If such reckless moves are forced, we will take necessary legal actions, including additional injunctions prohibiting treasury share acquisitions."

Meanwhile, Korea Zinc has chosen a two-track management defense strategy by launching a tender offer for Youngpoong Precision. Jericho Partners, a special purpose company (SPC) established by Youngpoong Precision chairman Choi Chang-gyu, Korea Zinc honorary chairman Choi Chang-young, and chairman Choi Yoon-beom, will conduct a tender offer for Youngpoong Precision shares at 30,000 KRW per share from today until the 21st. This price is 20% higher than the 25,000 KRW per share offered by MBK. If up to 25% (3,937,500 shares) are secured through the tender offer, the Choi chairman’s stake will increase from the current 35.31% to 60.3%. Youngpoong Precision holds 1.85% of Korea Zinc shares, which could become a casting vote in future share battles.