6% Stake Decides Outcome... Korea Zinc Enters On-Exchange Buy Battle

Current Yeongpung·MBK Stake at 38.47%
Korea Zinc and Allies Hold 36.8%

Yeongpung·MBK Plan Director Appointment at Extraordinary General Meeting
Need Third-Party Support as Stake Does Not Exceed Majority

The management rights dispute between Korea Zinc and Youngpoong MBK Partners has moved to an extraordinary general meeting of shareholders. Currently, about 6% of the circulating shares remain in the market. Both sides failed to secure a majority stake through public tender offers, making the 6% stake the deciding factor.

According to industry sources on the 29th, Korea Zinc is purchasing shares on the market immediately after the end of its public tender offer. Korea Zinc acquired 11.26% of treasury shares through the 20-day tender offer, but 9.85% of these are scheduled to be canceled, so it needs to secure additional voting rights shares. The remaining 1.41% was acquired by the private equity fund (PEF) Bain Capital, which participated in the joint tender offer.

Choi Yoon-beom, Chairman of Korea Zinc, is attending a Korea Zinc press conference held on the afternoon of the 2nd at the Grand Hyatt Hotel in Yongsan-gu, Seoul.
[Photo by Yonhap News]

Korea Zinc and its friendly forces have secured a total of 36.8% of shares, including the available treasury shares (1.4%). Meanwhile, the Youngpoong-MBK alliance, which completed its tender offer earlier, holds 38.47% of the shares. After Korea Zinc disposes of all the treasury shares acquired through the tender offer, the voting rights-based shares will increase to 42.67% for Youngpoong-MBK and 40.82% for Korea Zinc.

With neither side holding a majority, a fierce competition is expected over the approximately 6% of circulating shares remaining before the extraordinary general meeting. Korea Zinc’s stock price surged continuously after the tender offer ended on the 23rd, reaching a high of 1.47 million KRW before closing at 1.3 million KRW on the 28th.

The Youngpoong-MBK alliance is swiftly pushing for the extraordinary general meeting to limit Korea Zinc’s time to acquire additional shares. On the 28th, they sent a certified letter to Korea Zinc’s board requesting the convening of an extraordinary general meeting to resolve the appointment of 12 new outside directors and 2 non-executive directors, as well as amendments to the articles of incorporation to shift management rights from the board to an executive officer system.

MBK plans to dominate the board by appointing 12 outside directors and 2 other non-executive directors. Currently, among the 13 members of Korea Zinc’s board, 12 are aligned with Chairman Choi Yoon-beom, except for Jang Hyung-jin, an advisor to Youngpoong. Along with this, by introducing the executive officer system, management rights will be separated from the board, with executive officers such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) handling actual management tasks to enhance management efficiency.

However, amending the articles of incorporation to introduce the executive officer system requires a special resolution at the shareholders’ meeting under the Commercial Act, needing approval from two-thirds of the voting rights of attending shareholders and at least one-third of the total issued shares. If only both sides attend, the total shareholding is 75.27%, and two-thirds of this is 50.18%, so the current shares held by Youngpoong-MBK alone cannot pass the agenda. If the National Pension Service, which holds 7.83%, exercises its voting rights, a total of 83.1% shares would be present, requiring 55.4% approval. Even if the National Pension Service sides with MBK, winning the vote is difficult at present. However, the possibility of appointing new board members for Korea Zinc remains open. Board member appointments require at least one-quarter of the total shares to be present, with a majority approval among them.

For the MBK side’s request to convene the extraordinary general meeting to actually take place, Korea Zinc’s consent is essential. If Korea Zinc refuses, Youngpoong MBK must apply to the court for permission to convene the meeting. In that case, the extraordinary general meeting is likely to be held early next year or aligned with the regular March shareholders’ meeting. If Korea Zinc accepts the extraordinary general meeting, the vote battle between the two sides is expected to intensify next month. Korea Zinc expects the National Pension Service to support the current management’s judgment in this management rights dispute, as it has trusted them over the past five years.