Korea Zinc Increases Tender Offer for Treasury Shares from 830,000 to 890,000 Won... 3.2 Trillion Won Invested (Comprehensive)

Board Meeting Held on the 11th to Raise Price and Number of Shares Acquired
MBK and Youngpoong Camp's Strategic Move to Defend Management Rights

Choi Yoon-beom, Chairman of Korea Zinc, is speaking at the Korea Zinc press conference held on the afternoon of the 2nd at the Grand Hyatt Hotel in Yongsan-gu, Seoul. [Image source=Yonhap News]

Choi Yoon-beom, chairman of Korea Zinc, showed a strong determination to 'defend management rights' by simultaneously raising the tender offer prices for Korea Zinc's treasury shares and Youngpoong Precision. Since MBK Partners and Youngpoong have already stated that there will be no further increase in the tender offer price, attention is focused on whether Korea Zinc's recent price hike will enable it to maintain management control. The court's decision on MBK's injunction request to prohibit the purchase of Korea Zinc's treasury shares, expected as early as late next week, is anticipated to be a crucial variable.

On the morning of the 11th, Korea Zinc held a board meeting at its headquarters in Jongno, Seoul, and decided to raise the tender offer price for treasury shares from the current 830,000 KRW to 890,000 KRW and increase the number of shares to be acquired to up to 17.5% of the total issued shares. The financial burden from the tender offer will also increase from 2.6634 trillion KRW to 3.2245 trillion KRW. Although the tender offer price and volume have been raised, the purchase period remains unchanged from 4 days to 23 days. This day is the last day Korea Zinc can raise the purchase price without extending the tender offer period.

Accordingly, including the shares held by Bain Capital on Korea Zinc's side, the tender offer purchase shares will expand from the existing 18% to a maximum of 20%, or 4,140,657 shares. The policy to proceed with purchases without a minimum purchase quantity condition remains the same. To enhance accessibility and convenience for the treasury share tender offer, Korea Zinc added KB Securities as a co-manager alongside the existing Mirae Asset Securities.

Korea Zinc stated, "By expanding the tender offer price and maximum purchase volume, we expect to sufficiently absorb the shares circulating in the market," and emphasized, "This price adjustment is implemented according to the court's ruling and is the only way to block the hostile takeover (M&A) by MBK Partners and Youngpoong."

The view that Korea Zinc's price increase is an inevitable choice is dominant. This is because Korea Zinc is at a disadvantage compared to MBK in terms of tender offer period and taxes. In particular, individual investors responding to Korea Zinc's treasury share tender offer must pay dividend income tax. In this case, a 15.4% dividend tax is withheld on capital gains, but if financial income exceeds 20 million KRW, the tax rate can rise to as high as 49.5%. Participation in MBK and Youngpoong's tender offer is subject to a 22% capital gains tax.

The headquarters of Korea Zinc in Jongno-gu, Seoul, on the morning of the 11th when Korea Zinc held its board meeting. [Image source=Yonhap News]

The key issue is how many subscription volumes will flock to MBK's tender offer, which ends first. MBK and Youngpoong's Korea Zinc tender offer ends on the 14th. Securing the initially set minimum purchase volume of 1,445,036 shares (6.98% stake) is the most ideal scenario for them. MBK and Youngpoong have declared that they will not further increase the tender offer prices for Korea Zinc and Youngpoong Precision. After Korea Zinc's announcement of the tender offer price increase on this day, the stock price showed weakness, standing at 776,000 KRW as of 10:22 a.m. Considering the stock price trend and tax rates, investors' concerns are expected to deepen.

The injunction request filed by Youngpoong against Korea Zinc to prohibit treasury share purchases is also expected to remain a variable until the end. The injunction filed by Youngpoong on the 4th is likely to have a hearing on the 18th, with results expected around the 21st. Korea Zinc stated, "The Seoul Central District Court has already ruled that Korea Zinc's acquisition of its own shares is not illegal," and expects this injunction to be dismissed as well.

Jericho Partners announced on the same day that it would raise Youngpoong Precision's tender offer price from 30,000 KRW to 35,000 KRW. Jericho Partners, a special purpose company (SPC) jointly invested by Choi Chang-young, honorary chairman of Korea Zinc, and Choi Chang-gyu, chairman of Youngpoong Precision, decided to raise Youngpoong Precision's tender offer price on the 7th but postponed the public announcement to this day. Earlier, when the MBK-Youngpoong alliance raised Youngpoong Precision's purchase price to 30,000 KRW, making both sides' tender offer prices equal, Jericho's tender offer was considered disadvantageous. Youngpoong Precision holds a 1.85% stake in Korea Zinc, and if MBK secures management rights of Youngpoong Precision, it effectively gains 3.7% voting rights by combining Youngpoong Precision's 1.85% stake with Chairman Choi's 1.85% stake in Korea Zinc. Therefore, many expect Korea Zinc to have no choice but to raise the purchase price.