Goryeo Zinc Dispute 'Round 2'... What Is Choi Yoon-beom's White Knight Vote?

Chairman Choi Yun-beom's White Knight Hyundai Motor, LG, Hanwha Voting Direction in Focus
Hyundai Motor Absent from Board Meeting, LG as Gray Knight with Simple Cooperation in Secondary Batteries
Hanwha, Hankook Tire, Korea Investment & Securities Classified as Solid White Knights

As the second round of the management rights dispute over Korea Zinc enters the showdown over voting shares, attention is focused on the composition of Chairman Choi Yoon-beom's friendly shares. Although these shares have been broadly categorized as Chairman Choi's white knight shares, their actual voting support at the shareholders' meeting remains uncertain due to differing ownership purposes and interests.

According to the financial investment industry on the 17th, the Yeongpung-MBK Partners alliance, which secured 5.34% through a public tender offer, is expected to soon request the convening of an extraordinary shareholders' meeting related to board appointments.

If the MBK alliance assumes that Chairman Choi's side will purchase around 15% of the outstanding shares through the tender offer, their voting rights share would rise to 45.04%. On the other hand, the Choi family and their friendly shares amount to 36.55%, which translates to 42.79% in voting rights?2.25 percentage points lower than MBK. Some portion of the 18.55% classified as Chairman Choi's friendly shares may abstain from voting at the shareholders' meeting. The white knights' voting intentions have become more crucial than ever.

Looking more closely at Chairman Choi Yoon-beom's friendly shares, each holder has different backgrounds and interests. Hyundai Motor Group holds 5.05% through HMG Global LLC. They acquired these shares via a third-party allotment rights offering last September and are known to have invested to strengthen cooperation in Chairman Choi's vision of the 'Troika Drive,' which includes renewable energy, hydrogen, secondary battery materials, and resource circulation businesses.

However, among the friendly shares, Hyundai Motor, the largest shareholder, is considered closer to a 'gray knight' than a white knight. It is regarded as an unstable stake that may abstain from voting at the shareholders' meeting. This is because Hyundai's director consecutively missed board meetings where decisions on Korea Zinc's tender offer and price increase were made. Without a clear justification to actively intervene in the management dispute, Hyundai is likely to skip the shareholders' meeting that will mark the final resolution of the dispute. LG Chem (1.9%), holding shares for cooperation in the secondary battery business, and Morgan Stanley (0.5%), holding shares for profit purposes, are in similar situations.

On the other hand, Hanwha Group, holding about 7.8% of Korea Zinc shares through Hanwha H2 Energy USA (4.8%), Hanwha Impact (1.8%), and Hanwha (1.2%), as well as the global raw materials trading company Trafigura Group (1.5%), Korea Investment & Securities (0.8%), Hankook Tire & Technology (0.8%), and Chosun Refractories (0.2%), are known to have relatively solid cooperative relationships with Chairman Choi's side.

The biggest short-term variable is the outcome of the injunction lawsuit prohibiting Korea Zinc's acquisition of treasury shares through the tender offer. An investment banking (IB) industry insider said, "The court's decision is expected to have a significant impact on the white knights' voting direction," adding, "Because it provides an official justification for voting based on trust in the court's ruling." If the court recognizes, as Yeongpung and MBK claim, that acquiring treasury shares through the tender offer constitutes breach of fiduciary duty or procedural violations, it would be burdensome for the white knights to support Korea Zinc's side. Conversely, if the injunction is dismissed, the white knights can vote for Korea Zinc's side more freely.

Meanwhile, the MBK alliance plans to convene an extraordinary shareholders' meeting next month. If the MBK alliance appoints a new board of directors at the extraordinary meeting and gains a majority on the board, they can take control of Korea Zinc's management rights. Currently, Korea Zinc's board consists of 13 members, with 12 members aligned with Chairman Choi except for advisor Jang Hyung-jin from Yeongpung. If the MBK alliance appoints 12 new directors at the extraordinary meeting, they can dominate the board.