Goryeo Zinc Management Dispute, What Is MBK's Future Scenario?

MBK Requests Extraordinary General Meeting of Shareholders at Korea Zinc
Plans to Seize Board Control and Introduce Executive Officer System
Chairman Choi Yoon-beom Signals Investment Review After Inauguration

MBK Partners and Youngpoong have begun full-scale efforts to take control of the board of directors of Korea Zinc. Following the announcement of the results of Korea Zinc's tender offer, the MBK alliance requested the convening of an extraordinary general meeting of shareholders. The agenda for the shareholders' meeting also included the appointment of 14 new directors and amendments to the articles of incorporation to introduce an executive officer system where professional managers take responsibility for management. After gaining control of the board and amending the articles of incorporation, it is expected that they will review the investments made since Chairman Choi Yoon-beom's appointment as CEO and proceed with the process of recovering investment funds.

According to the investment banking (IB) industry on the 29th, the MBK alliance immediately requested the convening of an extraordinary general meeting of shareholders after the results of Korea Zinc's tender offer were announced. The MBK alliance nominated 12 individuals, including former Woori Bank President Kwon Kwang-seok, as outside directors, and Youngpoong President Kang Sung-doo and MBK Partners Vice Chairman Kim Kwang-il as non-executive directors. The MBK alliance stated, "Under Korea Zinc's current governance structure, it is difficult for the board to effectively supervise and audit management because executives also serve as directors or are merely proxies for a specific director (Chairman Choi Yoon-beom)." They added, "Most outside directors merely act as rubber stamps, leaving virtually no way to prevent Chairman Choi from privatizing management rights." Currently, Korea Zinc's board consists of 13 members, and except for one advisor from Youngpoong, Jang Hyung-jin, all are classified as associates of Chairman Choi Yoon-beom. If 12 or more of these members are appointed, the MBK alliance is expected to hold a majority on the board.

Additionally, the MBK alliance proposed amendments to the articles of incorporation to introduce an executive officer system. This system would introduce executive officers responsible for actual execution functions, such as Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Technology Officer (CTO), to enhance operational efficiency. The MBK alliance explained, "Since the shares of the Jang and Choi families are dispersed among many individuals, no single shareholder can take responsible management of the company anymore. Considering that the current board has been thoroughly paralyzed, as evidenced by the resolution for a self-tender offer that caused significant damage to the company, we decided to introduce the executive officer system."

It is anticipated that after gaining control of the board, MBK will closely scrutinize the investments made since Chairman Choi Yoon-beom took office as CEO. MBK has criticized that out of 38 invested companies since 2019, 30 have recorded net losses. MBK is reportedly planning to proceed with recovering investment funds, including investments in Won Asia Partners, which have been suspected of breach of fiduciary duty, to restore financial soundness damaged by the self-tender offer and other actions.

Meanwhile, Korea Zinc secured a total of 11.26% of shares through a tender offer conducted together with its ally Bain Capital. Korea Zinc acquired 9.85% of treasury shares (2,040,300 shares), and Bain Capital secured 1.41% (291,272 shares). Previously, the MBK alliance had expanded its stake to 38.47% through a tender offer, with a difference of about 3 percentage points between the two sides. If the treasury shares acquired by Korea Zinc are canceled, the total number of shares will decrease, resulting in an increase in the stakes of the MBK alliance and Chairman Choi to 43.9% and 40.4%, respectively. Although MBK holds a slight advantage in voting rights, since neither side has secured a majority stake, fierce competition over shares through on-market purchases and friendly shareholders is expected going forward.