Park Gideok Proposes Grand Compromise in Press Conference
"We Will Proactively Open the Board to MBK"
Chairman Choi Yunbeom Also to Step Down as Board Chair
MBK Announces Plan to File Criminal Charges Against Chairman Choi
"Will Challenge General Meeting Resolutions with Injunctions"
Korea Zinc proposed a reconciliation to the Youngpoong-MBK Partners alliance (hereinafter MBK alliance), with whom it is engaged in a management rights dispute, on the 24th. The proposal aims to stop the four-month-long conflict and seek future cooperation. However, since the MBK alliance has announced plans for criminal charges in response to Korea Zinc's restriction of Youngpoong's voting rights shares and continuation of the extraordinary general meeting held the previous day, it is uncertain whether this proposal will be accepted.
Korea Zinc CEO Park Ki-deok is speaking at a press conference regarding the results of the extraordinary general meeting held on the afternoon of the 24th at the Grand Hyatt Hotel in Yongsan, Seoul. Photo by Yonhap News
Korea Zinc: "It's time to stop the wasteful conflict"
On the day, Park Ki-deok, CEO of Korea Zinc, held a press conference at the Grand Hyatt Seoul Hotel in Yongsan, Seoul, and proposed to the MBK alliance "to start a dialogue for a grand compromise." Park said, "It is now time to stop the wasteful conflict filled with forced claims and slanders," adding, "For the sake of the company called Korea Zinc and our shared dream, it is time to temporarily forget the past and find a reasonable solution for everyone."
Regarding the background of taking such a progressive stance, Park explained, "I pondered deeply on how to approach the extraordinary general meeting held the previous day," and concluded, "We decided to do our best so that the parties involved in the conflict and dispute can communicate and have dialogue together." However, he emphasized, "The MBK alliance seems to accuse our defense as being for Chairman Choi Yun-beom personally, but I want to make it clear that such criticism insults and disregards Korea Zinc’s employees, technical staff, and labor union, and is a hostile merger and acquisition (M&A) strategy."
Park said, "Because our love for Korea Zinc is greater than the wounds, we are considering accepting the MBK alliance as a new partner rather than an enemy," and added, "If the grand compromise is accepted, Korea Zinc believes it can work together with the MBK alliance for a better future." He continued, "I believe it is possible for MBK to play a positive role as a partner of the company, which is the proper function of private equity funds," and said, "I hope MBK regains composure and seriously considers our words."
As a proposal based on compromise, Park announced that the board of directors would be progressively opened to the MBK alliance. He said, "If we can cooperate and trust based on Korea Zinc’s development, I expect this will promote diversity in the board composition," and added, "If MBK desires, we will also open the path for management participation." Park also said, "Chairman Choi has promised to step down from the chairmanship of the board," and "This promise will be realized at the next board meeting."
Finally, Park once again requested the MBK side to consider and review cooperation, stating, "I want to emphasize again that the process of preparing for the extraordinary general meeting the previous day was also a process for a new beginning." He added, "MBK must clearly understand that without everyone’s cooperation, the path ahead is full of great hardships," and "I hope they deeply contemplate what the path of coexistence is and what the swamp of mutual destruction looks like."
MBK: "We will file criminal charges... prepared for prolonged dispute"
However, thorny paths are expected before Korea Zinc’s proposal materializes. Earlier, the MBK alliance declared that Korea Zinc’s creation of a circular shareholding structure through its Australian subsidiary to utilize the 'mutual share restriction' system was illegal and announced plans to file criminal charges against Chairman Choi and others ahead of the extraordinary general meeting.
Kim Kwang-il, Vice Chairman of MBK Partners, held an online press briefing before Korea Zinc’s press conference and said, "Korea Zinc committed illegal acts by using its subsidiary Sun Metal Corporation (SMC) for its own purposes, so it is subject to criminal punishment, and we plan to report this to the Fair Trade Commission and investigative agencies."
Earlier, on the 22nd, a day before the extraordinary general meeting, Korea Zinc announced that Sun Metal Corporation (SMC), an Australian affiliate subsidiary established through Sun Metal Holdings, purchased about 190,000 shares of Youngpoong stock previously owned by Chairman Choi’s family and Youngpoong Precision for 57.5 billion KRW in an over-the-counter transaction. The shares acquired by SMC account for 10.33% of Youngpoong’s total shares. Through this share transaction, a circular shareholding chain was created linking Korea Zinc, Sun Metal Holdings, SMC, Youngpoong, and back to Korea Zinc, utilizing the 'mutual share voting rights restriction' system under the Commercial Act. This measure restricted the voting rights of 25.42% of Youngpoong shares held by the MBK alliance, and Korea Zinc succeeded in defending its management rights by having all seven director candidates it proposed admitted to the board.
Vice Chairman Kim emphasized that all these actions are illegal. He criticized, "The fact that Park Ki-deok, CEO of Korea Zinc, and Chairman Choi Yun-beom resigned from SMC’s board earlier this month shows they recognized the problem," and added, "Chairman Choi committed illegal acts prohibited by the Fair Trade Act by involving SMC and selling Youngpoong shares to it at a 30% discount to protect his management rights." He also said, "We will file an injunction with the court to challenge the validity of the extraordinary general meeting’s decisions made yesterday," and emphasized, "We will file criminal charges and remove Chairman Choi from his position."
Vice Chairman Kim also expressed his determination not to give up the dispute midway. He said, "Chairman Choi wants us to give up, but we have plenty of time and funds," and added, "We intend to enter the Korea Zinc board of directors by any means and put all our efforts into it." This is interpreted as a willingness to engage in a long-term battle, unlike private equity funds that have withdrawn quickly in past management disputes.
At the Korea Zinc extraordinary shareholders' meeting held on the 23rd at the Grand Hyatt Seoul in Yongsan-gu, Seoul, Moon Byung-guk, chairman of the Korea Zinc labor union, along with union members, are shouting slogans. Photo by Jo Yong-jun
The never-ending Korea Zinc management rights dispute
The Korea Zinc management rights dispute intensified through the first half of last year’s regular general meeting, involving a vote battle over dividends and articles of incorporation amendments between Youngpoong and Korea Zinc, Korea Zinc’s declaration to stop joint raw material purchasing and sales, and Korea Zinc’s acquisition of management rights of Seorin Corporation. The dispute decisively exploded when Youngpoong teamed up with private equity fund MBK on September 13 last year and launched a public tender offer for Korea Zinc shares at 660,000 KRW per share.
After a trillion-won 'money war' between Korea Zinc and the MBK alliance, the interim results at the end of December last year showed that the Youngpoong-MBK alliance held 46.72% of voting shares, while Korea Zinc and its friendly shares held 39.16%. During the management rights dispute, Korea Zinc focused on public opinion campaigns to secure votes from the National Pension Service, foreign institutional investors, and friendly shareholders. Amid intensifying US-China decoupling and the growing importance of de-China supply chains, Korea Zinc actively leveraged the fact that it controls a 'choke point' in the advanced industry supply chain in domestic and international public opinion. In fact, the precursor manufacturing technology for cathode materials of secondary batteries held by Korea Zinc was designated as a national core technology.
However, after Korea Zinc ended its share buyback at the end of October last year, it immediately announced a paid-in capital increase with treasury shares, facing fierce criticism from the market. Due to sanctions from the Financial Supervisory Service, it eventually withdrew the capital increase plan, which was considered a misstep. Furthermore, the concentrated voting system, introduced as a 'hidden card' to block the MBK alliance’s board control at this month’s extraordinary general meeting, was also halted by the court, leading to speculation that the four-month-long management rights dispute might end with the defeat of the Choi family.
However, the situation reversed when Chairman Choi’s side took measures to restrict the voting rights of Youngpoong’s Korea Zinc shares ahead of the extraordinary general meeting. As a result, Korea Zinc was able to appoint all the directors it proposed and succeeded in defending its management rights. Nevertheless, since the MBK side has announced legal actions regarding the extraordinary general meeting results based on Korea Zinc’s circular shareholding card, the management rights dispute is expected to continue with further legal battles in the future.
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