Korea Zinc Tender Offer 'Day of Destiny'... Likely to Shift to On-Exchange Purchase Battle

End of Treasury Stock Tender Offer on 23rd
Korea Zinc, Yeongpung and MBK All Fail to Secure Majority
Both Sides Likely to Immediately Start On-Exchange Purchases

Korea Zinc's open tender offer for treasury shares will end on the 23rd. Even if it acquires the maximum volume offered (20%), it will not affect voting rights, so it is expected to compete with Yeongpung and MBK Partners, who are engaged in a management rights dispute, in on-market purchases.

According to the industry, Korea Zinc will complete the subscription for the open tender offer for treasury shares by this day. Although the maximum purchase volume (20%) proposed by Korea Zinc exceeds the circulating volume (18%), industry observers believe it is practically impossible to purchase all of it.

If the open tender offer is successful and Korea Zinc absorbs most of the circulating shares, the MBK alliance is expected to maintain its current slightly advantageous shareholding situation. Yeongpung and MBK have secured 38.47% of the shares after the open tender offer, and Chairman Choi and allied shares, including the 2.5% to be acquired by Bain Capital, amount to 36.49%. If Korea Zinc cancels all the treasury shares it acquires, the voting rights-based shares of both sides will increase to the 40% range.

However, since neither side has a majority stake and the difference in shares is minimal, they are expected to enter into a competition for on-market purchases of the remaining shares. In particular, from Korea Zinc's perspective, it may be more advantageous to buy the remaining shares on the market rather than purchasing treasury shares and canceling them. Most of the shares to be acquired through this open tender offer (17.5%) will be canceled as treasury shares, which does not help secure voting rights. On-market purchases can be the fastest way to secure voting rights. Additionally, Korea Zinc can increase its shares by selling its current treasury shares (2.4%) to allied forces.

If both sides enter the shareholders' meeting without securing a majority stake, the voting intention of the National Pension Service, which holds 7.83% of the shares, is likely to play a decisive role. Currently, it is expected that the National Pension Service will support Chairman Choi's side. Over the past five years, the National Pension Service has supported 92.5% of the proposals submitted at shareholders' meetings, showing trust in the current management's decisions.

The fact that the injunction requests to halt the open tender offer filed by the Yeongpung-MBK alliance were dismissed twice can also be a positive factor for Chairman Choi's side. This can be interpreted as a legal judgment that Korea Zinc's defense of management rights is legitimate.

Separate from the open tender offer, legal battles are also expected to intensify. Korea Zinc CEO Park Ki-deok recently stated at a press conference, "The injunction request by the Yeongpung-MBK alliance disrupted market order, which could cause serious legal defects in legality and validity," and announced that legal responsibility will be pursued. The Yeongpung-MBK alliance also intends to hold the current management of Korea Zinc accountable for the treasury share open tender offer through the main lawsuit. The injunction ruling means that it has not been clearly proven that the open tender offer for treasury shares constitutes a breach of trust, but it does not mean there is no illegality.