Korea Zinc and Young Poong Precision to Raise Tender Offer Price Above 35,000 Won

Discussion at the Board Meeting on the Morning of the 7th
Decision on Whether to Increase the Purchase of Korea Zinc Also This Week
Korea Zinc Announces "1 Trillion Won of Own Funds Are Borrowed"
Intensifying 'Money War' with Youngpoong-MBK Alliance

Korea Zinc plans to raise the tender offer price for Yeongpung Precision, the core of the stake battle with the Yeongpung-MBK alliance, to at least 35,000 KRW per share. Along with this, Korea Zinc is actively considering raising its own share tender offer price within this week. As the tender offer competition intensifies, attention is also focused on the financial mobilization capacity of both sides.

Jericho Partners, a special purpose company (SPC) jointly invested by Honorary Chairman Choi Chang-young of Korea Zinc and Chairman Choi Chang-gyu of Yeongpung Precision, will hold a board meeting on the morning of the 7th to discuss raising the tender offer price for Yeongpung Precision. Jericho Partners has been conducting a tender offer since the 2nd to purchase 25% (3,937,500 shares) of Yeongpung Precision at 30,000 KRW per share, but after the Yeongpung-MBK alliance matched the tender offer price for Yeongpung Precision, they decided to raise it again. Although the price per share is the same, the Yeongpung-MBK side holds a larger volume (6,840,801 shares, 43.43% stake).

The tender offer price for Yeongpung Precision is expected to exceed 35,000 KRW. As of 10:30 AM on the same day, Yeongpung Precision’s stock price was already trading above 30,000 KRW, up 7.85% from the previous trading day at 34,350 KRW.

The Choi family, including Chairman Choi Yoon-beom, reportedly raised funds for the tender offer by selling about 30 billion KRW worth of Yeongpung shares from the 23rd of last month to the 2nd of this month. The market also speculates that Chairman Choi’s family may sell additional Yeongpung shares.

Attention is focused on whether Korea Zinc will raise its own share tender offer price. On the 4th, Yeongpung-MBK raised Korea Zinc’s tender offer price from 750,000 KRW to 830,000 KRW per share and removed the minimum order quantity condition, countering Korea Zinc’s own share tender offer. Although Korea Zinc’s method of purchasing and then canceling its own shares is disadvantageous in terms of dividend tax and other conditions, it holds an advantage in volume.

For Korea Zinc to raise the tender offer price without extending the period, it must hold a board meeting and decide on the price increase by this week. If the tender offer price is not adjusted by the 11th, the tender offer period for Chairman Choi’s side will be extended by 10 days. Currently, the tender offer period is until the 23rd of this month for Korea Zinc and until the 14th for the Yeongpung-MBK side.

Korea Zinc states that it has no problem with funding. Of the 1.5 trillion KRW of self-funds disclosed for share repurchase, 1 trillion KRW is debt. Korea Zinc corrected the tender offer fund composition details in the tender offer report filed through the Financial Supervisory Service’s electronic disclosure system. Initially, Korea Zinc announced it would use 1.2 trillion KRW in borrowings, but reclassified 1 trillion KRW of corporate bonds issued through Meritz Securities from equity to debt, increasing the debt ratio. However, Korea Zinc plans to use 500 billion KRW out of the 760 billion KRW of self-funds it holds for the tender offer. Considering the credit lines from Hana Bank and SC First Bank, it can additionally raise 500 billion KRW.

The financial capacity of the Yeongpung-MBK alliance is also drawing attention. MBK is raising tender offer funds through its 6th buyout fund, which can reach up to 10 trillion KRW. Typically, fund investment limits are around 20%, but depending on the proportion set in this deal, more funds may be deployed. On the 4th, Yeongpung-MBK raised the tender offer price to 830,000 KRW, increasing the required fund size from 2.272 trillion KRW to 2.514 trillion KRW.

An industry insider said, "MBK cannot draw unlimited funds from the fund, so further increases may not be easy," adding, "Both sides are likely to raise the tender offer price for Yeongpung Precision, where the financial burden is relatively lighter."

Legal disputes have also emerged as a variable. Yeongpung-MBK has filed for an injunction at the Seoul Central District Court to halt Korea Zinc’s own share repurchase process, claiming it is illegal. Meanwhile, Yeongpung Precision has filed for an injunction to suspend the management cooperation agreement, alleging that the shareholder agreement by Yeongpung-MBK involves breach of fiduciary duty. Additionally, Korea Zinc’s management is reportedly preparing further legal responses.