MBK's Call Option Contract for Selling Korea Zinc Shares
Price and Specific Method Not Disclosed
Korea Zinc Criticizes as "Closed-Door Collusion"
As Yeongpung and MBK Partners launched a public tender offer for Korea Zinc, controversy surrounding the contract between the two companies is spreading. Although a call option contract allowing MBK to acquire Yeongpung's stake in Korea Zinc was signed, the specific terms and price have not been disclosed, raising suspicions.
According to industry sources on the 8th, the two companies signed a management cooperation agreement for the appointment of directors at Korea Zinc. This agreement includes joint exercise of voting rights so that the number of directors recommended by MBK exceeds those recommended by Yeongpung by one. It also includes a call option allowing MBK to purchase 50% plus one share of the existing shares held by Yeongpung and the shares acquired through the public tender offer. The call option can be exercised two years after the completion of the tender offer or on the day MBK controls the majority of the Korea Zinc board of directors.
Chairman Choi Yoon-beom of Korea Zinc and Advisor Jang Hyung-jin of Youngpoong. [Photo provided by each company]
However, the call option price and specific transaction methods have not been disclosed. Some speculate that the call option price might be adjusted based on the tender offer price used to acquire Korea Zinc. Yeongpung and MBK stated, "The call option price is fixed at an agreed price considering the Korea Zinc management premium." Nevertheless, Korea Zinc remains skeptical. If the call option price is adjusted according to the tender offer price, the higher the tender offer price, the cheaper MBK can buy Yeongpung's stake in Korea Zinc.
Korea Zinc criticized the contract as a ‘secret collusion’ between MBK and Yeongpung, claiming that Yeongpung Corporation suffers losses while MBK gains benefits. Yeongpung Precision has filed a complaint with the Seoul Central District Prosecutors' Office against Yeongpung management and MBK on charges of breach of trust.
Korea Zinc also sparked controversy by revising the funding details for its treasury stock tender offer. Previously, it was disclosed that out of the 2.6635 trillion KRW invested in the tender offer, 1.5 trillion KRW would be sourced from internal company funds, but it was revealed that 1 trillion KRW of that was from corporate bonds issued through Meritz Securities. Accordingly, Korea Zinc corrected that only 500 billion KRW would actually be invested from internal funds.
Korea Zinc had earlier announced plans to raise 2.7 trillion KRW through short-term borrowings from financial institutions (1.7 trillion KRW) and corporate bond issuance to repurchase its shares.
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