"Hanwha Shares Dumped at Bargain Price, Over 100 Billion Won in Losses"... MBK Sues Korea Zinc Executives

Damages Lawsuit Filed Against Chairman Choi Yunbeom and CEO Park Giduk
"Hanwha Shares Sold at a Bargain Price by Unilateral Decision... Shareholders Suffer Losses"

MBK Partners has filed a damages lawsuit against Choi Yunbeom, chairman of Korea Zinc, and Park Giduk, CEO of Korea Zinc. The lawsuit claims that they caused damages amounting to tens of billions of won by disposing of Hanwha shares held by Korea Zinc at a low price without a board resolution.

On May 12, Korea Corporate Investment Holdings, an investment vehicle of MBK, filed this damages claim against Chairman Choi and CEO Park at the Seoul Central District Court. The company stated that it intends to exercise its rights as a shareholder, arguing that in November of last year, Choi and Park inflicted losses on Korea Zinc by selling 5,436,380 Hanwha shares (7.25% of total issued shares) at a low price without a board resolution.

Previously, about a month ago, Korea Corporate Investment Holdings requested the Korea Zinc audit committee to investigate the circumstances of the Hanwha share disposal and to demand compensation from Chairman Choi and other executives. After the audit committee failed to take any action, Korea Corporate Investment Holdings decided to file the lawsuit directly.

The amount of damages claimed is 19.6 billion won. However, the company argued that if the shares had not been sold and had been continuously held, the expected value would far exceed 100 billion won. Hanwha's share price has already risen more than 80% compared to the time of disposal.

On November 23, 2022, Korea Zinc acquired a 7.25% stake in Hanwha at 28,850 won per share, under the pretext of a business alliance and mutual shareholding. On November 6 of last year, during an ongoing management dispute with Young Poong and MBK, Chairman Choi and CEO Park sold Korea Zinc's Hanwha shares at 27,950 won per share. At the time, there was still one year left in the three-year lock-up period, and the shares were sold at a price 3% lower than the purchase price, resulting in a loss of 5 billion won. As of the closing price on May 9, Hanwha shares were trading at 52,000 won, an 86% increase compared to the time of Korea Zinc's disposal.

The buyer at the time was Hanwha Energy, a company 100% owned by third-generation members of the Hanwha Group. About four months before purchasing the shares from Korea Zinc, Hanwha Energy had conducted a public tender offer for 6 million Hanwha shares at 30,000 won per share. If Korea Zinc had participated in the tender offer at that time, it could have realized a capital gain of about 11 billion won.

Korea Corporate Investment Holdings stated, "If Korea Zinc had held onto the Hanwha shares, just as Hanwha continues to hold the Korea Zinc shares acquired through mutual shareholding, the company could have seen an appraisal gain of 130.7 billion won. Chairman Choi and CEO Park made a unilateral decision that went against the interests of all shareholders in order to gain support from a Hanwha affiliate, causing significant financial losses not only to Korea Zinc but also to its shareholders by selling shares that should have commanded a premium."

Choi Yunbeom, chairman of Korea Zinc, is speaking at a Korea Zinc press conference held on the 13th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. On the right is Park Giduk, CEO. On this day, Chairman Choi stated, "I will step down from the position of chairman of the board as soon as possible and have an outside director take the position of chairman of the Korea Zinc board." Photo by Kim Hyunmin