10 Directors Approve Tender Offer for Treasury Shares
Yeongpung Considering Withdrawal of Legal Action
Chairman Choi Yun-beom's Complaint Maintained
Goryeo Zinc Affiliate Yeongpung Precision
Advisor Jang Hyung-jin and 3 Yeongpung Outside Directors
Unlikely to Withdraw Legal Action
Yeongpung and MBK Partners are reportedly determined not to withdraw the charges against Choi Yoon-beom, chairman of Korea Zinc. Earlier, Yeongpung and MBK filed criminal complaints against the board members who approved Korea Zinc's tender offer for treasury shares, but even if they withdraw these complaints at an appropriate time after the management dispute is resolved, they intend for Chairman Choi to face legal judgment. It is also evaluated that with the Choi family selling all their Yeongpung shares, a definite end is being marked to the 75-year partnership between the Choi and Jang families in the Yeongpung Group.
According to industry sources on the 28th, Yeongpung is considering withdrawing the legal actions filed against the 10 directors of Korea Zinc. This is because the competition over share acquisition, including the tender offer, has subsided, and continuing legal disputes is deemed inappropriate. However, since the management rights have not yet been regained following the tender offer attempt, it is sensed that it is too early to discuss the timing of withdrawal.
Nevertheless, Yeongpung maintains its stance on pursuing charges against Chairman Choi. A business insider said, "The reason Yeongpung joined forces with MBK is due to deep dissatisfaction with Chairman Choi's management," adding, "While they may withdraw complaints against other executives in hopes of future cooperation, they are expected to hold Chairman Choi legally accountable to the end."
Earlier this month, Yeongpung filed complaints against the Korea Zinc board's decision to conduct a tender offer for treasury shares, calling it "a breach of duty causing financial loss to the company." Chairman Choi was especially criticized for prioritizing personal interests over shareholder benefits during his tenure as CEO.
The reason behind Yeongpung's tough stance on Chairman Choi is the perception that his actions triggered a series of incidents. After the Ministry of Environment's environmental investigation of Yeongpung's Seokpo smelter in 2018, Yeongpung requested Korea Zinc to handle the waste generated at the smelter, but Chairman Choi reportedly refused. Due to the nature of the smelting industry, waste disposal is essential for plant operation, and since the Seokpo smelter had no means to handle it independently, Chairman Choi was seen as holding Yeongpung's lifeline.
Following Chairman Choi's appointment in 2022, conflicts arose between the new business strategy 'Troika Drive' and Yeongpung's dividend expansion strategy. Both sides clashed over these issues at the shareholders' meeting, but Chairman Choi won decisively. It is reported that the Jang family felt a crisis, realizing they could potentially lose Korea Zinc.
Furthermore, Korea Zinc stopped processing sulfuric acid from the Seokpo smelter and cut off raw material supply and sales channels through Seorin Trading (now KZ Trading). Chairman Choi's relentless attacks on Yeongpung and the Jang family were perceived as causing business difficulties. Consequently, Yeongpung filed a lawsuit claiming Korea Zinc's issuance of new shares to Hyundai Motor Group's overseas affiliates was illegal, ultimately leading to MBK joining in the effort to regain management rights.
On March 19th, shareholders are entering the 'Korea Zinc Annual General Meeting' held at the Yeongpung Building Annex in Gangnam-gu, Seoul. Photo by Jin-Hyung Kang aymsdream@
After securing management rights of Korea Zinc, Yeongpung plans to step back from actual management. Once share acquisition is finalized, half of the shares plus one share will be transferred to MBK Partners. Although Yeongpung will lose a significant portion of its Korea Zinc shares, it expects to turn around the previously precarious situation.
Korea Zinc, on the other hand, remains steadfast. Chairman Choi and Choi Chang-young, honorary chairman and eldest son of founder Choi Ki-ho, reaffirmed their intention to separate by selling all Yeongpung shares on the 23rd and 24th during the tender offer. It is reported that Korea Zinc does not intend to lift legal actions against Yeongpung Precision, an affiliate, as well as Yeongpung advisor Jang Hyung-jin and three outside directors of Yeongpung.
The split between the two sides is expected to be confirmed at an upcoming extraordinary shareholders' meeting. Korea Zinc secured a total of 11.26% (including Bain Capital's 1.4%) in the recently concluded tender offer on the 23rd. Including treasury shares available for sale to friendly parties (2.4%), they hold a total of 36% friendly shares. Yeongpung and MBK hold 38.47% shares, but neither side holds a majority of voting rights. Some speculate that they may attempt to secure a majority through open market purchases. However, the recent overheated stock price poses a variable. If both sides fail to secure a majority, a vote battle at the shareholders' meeting will be inevitable.
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