MBK Raises Tender Offer Price to 830,000 Won
Minimum Purchase Quantity Also Removed
Conditions Almost Identical to Korea Zinc
Korea Zinc Has Larger Tender Offer Volume
Applicable Taxes Differ Between Capital Gains and Dividend Taxes
Yeongpung and MBK Partners have raised the tender offer price on the closing date from the original 750,000 KRW to 830,000 KRW, matching the price set by Choi Yoon-beom, chairman of Korea Zinc. As the tender offer conditions of both parties have become similar, investors' attention is focused on their choices.
On the 4th, Yeongpung and MBK announced a correction to their tender offer report, stating that the price of Korea Zinc's tender offer, which began on the 13th of last month, will be increased from 750,000 KRW to 830,000 KRW. At the same time, they removed the previous condition that they would only purchase if the tendered shares exceeded about 7% of the total issued shares. Both the price and conditions have thus been aligned with those of Chairman Choi's tender offer.
The maximum number of shares Yeongpung and MBK will purchase remains the same at 3,024,881 shares (14.61% stake). If the tendered shares do not exceed the maximum purchase quantity, they will buy all tendered shares; if the tendered shares exceed the maximum purchase quantity, they will purchase on a pro-rata basis. The total tender offer amount has increased by approximately 241.9 billion KRW, from about 2.272 trillion KRW to 2.514 trillion KRW.
Although the tender offer conditions of both parties have become almost identical, Korea Zinc holds an advantage in terms of purchase volume. Starting today, Korea Zinc, together with the global private equity fund Bain Capital, is conducting a tender offer to purchase 3,726,591 treasury shares (18.8% stake) at 830,000 KRW per share.
However, Yeongpung and MBK are capitalizing on the uncertainty surrounding the legality of Korea Zinc's treasury share purchase. MBK explained, "There is still a court decision pending regarding Chairman Choi's treasury share tender offer due to allegations of breach of trust, creating uncertainty," and added, "There is also controversy over the illegal acquisition of treasury shares exceeding the limit for repurchasing own shares, which may lead investors to consider subscribing to Yeongpung's tender offer as safer."
Earlier, on the 2nd, Yeongpung filed another injunction request with the Seoul Central District Court to halt the treasury share purchase process immediately after Korea Zinc's board resolution. They also argue that the treasury share purchase promoted by Korea Zinc's board resolution may violate the Commercial Act by exceeding its authority and that the possible scale of treasury share purchase is only about 58.6 billion KRW.
Choi Yoon-beom, Chairman of Korea Zinc, is attending the Korea Zinc press conference held on the afternoon of the 2nd at the Grand Hyatt Hotel in Yongsan-gu, Seoul. [Photo by Yonhap News]
On the other hand, Korea Zinc maintains that it has distributable capital exceeding 6 trillion KRW and that, based on this, a lawful treasury share purchase under the Commercial Act is possible. Park Ki-duk, CEO of Korea Zinc, stated, "Despite conducting the tender offer, they are unsettling shareholders with false information," and added, "We have promptly reported to the Financial Supervisory Service and initiated criminal proceedings for the dissemination of false information."
There are also tax differences between the two tender offers. Domestic institutional investors must pay corporate tax on both Yeongpung·MBK's tender offer and Korea Zinc's treasury share tender offer, but individual investors are subject to different tax rates depending on the case.
If individual investors participate in Yeongpung·MBK's tender offer, a 22% capital gains tax is imposed on the capital gains. In contrast, if they respond to Korea Zinc's treasury share tender offer, since the acquisition is for the purpose of treasury share cancellation, dividend income tax applies. In this case, a 15.4% dividend income tax is withheld on the capital gains, and if financial income exceeds 20 million KRW annually, the comprehensive financial income tax applies, raising the tax rate up to 49.5%.
Meanwhile, with Yeongpung·MBK consortium changing the tender offer conditions, the tender offer period, originally scheduled to end on the 6th, has been extended to the 14th of this month. Korea Zinc's treasury share tender offer period runs until the 23rd of this month.
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