Goryeo Zinc Management Dispute, 'Proxy Fight' 3rd Round Battle Begins

Goryeo Zinc Tender Offer Competition Ends on 23rd
'Proxy Battle' Begins Targeting Major Shareholders
Focus on Whether Hyundai Motor, LG Chem and Others Will Withdraw as White Knights

The stock tender offer competition between the MBK-Yeongpung alliance and Chairman Choi Yun-beom of Korea Zinc over management rights ended on the 23rd. Neither side reached a majority of voting rights shares, leading to the start of a full-fledged third round of battle centered on the proxy fight for shareholder meeting proxy votes.

Korea Zinc Ends Treasury Stock Tender Offer... Reason for Delaying Result Disclosure is 'MBK Containment Strategy'

According to the financial investment industry on the 24th, Korea Zinc did not disclose the results of its treasury stock tender offer, which ended with the market close the previous day.

Considering that Korea Zinc’s closing price the previous day was 876,000 won, lower than 890,000 won, the industry estimates that Korea Zinc likely purchased shares close to its target. Korea Zinc aimed to secure up to 17.5% through the treasury stock tender offer and an additional 2.5% through a tender offer conducted by its ally Bain Capital.

A Korea Zinc official said, "Despite Yeongpung and MBK causing market confusion and unsettling investors and shareholders with 'blind injunction applications,' we thank the shareholders and investors who trusted Korea Zinc," adding, "Once the final tender offer results are tallied, we will proceed with subsequent processes such as disclosures in accordance with legal procedures."

The reason Korea Zinc is delaying the announcement of the tender offer results is interpreted as a move to prevent the Yeongpung-MBK alliance from acquiring additional shares on the market. Since treasury stocks do not have voting rights, the higher the subscription rate in the tender offer, the higher the voting rights share held by Yeongpung and MBK.

If Korea Zinc purchased 10% of the total shares through the treasury stock tender offer, the Yeongpung-MBK alliance’s stake would rise to about 43%, and Chairman Choi’s side, including Bain Capital’s friendly shares, would increase to about 40%. If the full target amount of 20% responded to the tender offer, the voting rights share of the Yeongpung-MBK alliance’s 38.47% stake would rise to about 48%, and Chairman Choi’s stake would increase to about 45%.

MBK Focuses on Trading Volume on the 24th... Proxy Fight Begins

While Korea Zinc delays announcing the tender offer results, MBK is expected to focus on the trading volume on the 24th, the day after the tender offer ended. An investment banking (IB) industry official said, "By looking at the trading volume on the 24th, one can roughly estimate the tender offer situation," adding, "There is no way to buy large blocks of shares on the market, and acquisitions can only be made within the minimum range that does not affect the market." He said, "From now on, the typical proxy fight for exercising voting rights will begin," and "Since there is time until the shareholder meeting is held, there is enough time to persuade shareholders. There is no need to rush."

A voting rights solicitation war is expected between both sides targeting shareholders such as Hanwha Group (7.8%), Hyundai Motor Group (5.05%), LG Chem (1.9%), and Trafigura Group (1.5%). Attention is also focused on whether Hyundai Motor Group, LG Chem, Korea Investment & Securities, and Hankook Tire, classified as friendly shares to Chairman Choi, will defect. In particular, the voting rights exercise of the National Pension Service, which holds 7.83% of shares before the tender offer began, is receiving the greatest attention as a 'casting vote.'

Meanwhile, if MBK requests an extraordinary general meeting, it is expected to take several months before the actual meeting is held. An IB industry official said, "Even if the board of directors immediately convenes a shareholder meeting, it takes about a month and a half, and if it goes to court, it takes about three months." Both sides are expected to fiercely battle outside the market while emphasizing their justification for management rights.