Yongpoong and MBK: "Korea Zinc Provided Inheritance Tax Support to Hanjin Family Through 'Parking Deal'"

Investment Return from Hanjin Affiliate Jeongseok Enterprise Falls Below 3% Per Year
Criticism Raised Over 'Stock Parking Deal' as Funds Lent at Low Interest Rate

Yongpoong and MBK Partners, who are engaged in a management dispute with Choi Yunbeom, chairman of Korea Zinc, pointed out that Chairman Choi's investment in a Hanjin Group affiliate, made through a middle school classmate, was in fact financial support for Hanjin Group's inheritance tax funding. They argued this was because the investment was unrelated to Korea Zinc's main business, was made for an unclear purpose, and was recovered after four years with an annual return of only about 3%, which is lower than the five-year government bond yield.

On the 16th, Yongpoong and MBK released this statement. Previously, Hanjin KAL, the holding company of Hanjin Group, announced that it would exercise a call option (the right to purchase shares) and acquire a 12.22% stake in Jeongseok Enterprise from Korea Zinc for 5,206,200,000 won.

Earlier, in March 2021, Hanjin KAL and the owner family sold a 12.22% stake in Jeongseok Enterprise to Jaguar No.1 Private Company, an investment purpose company, in order to raise about 270 billion won for inheritance tax following the death of the late Cho Yangho, former chairman of Hanjin Group. This company was established by a private equity fund managed by Ji Changbae, a middle school classmate of Chairman Choi. Korea Zinc is a limited partner (LP) holding a 99.2% stake in One Asia Partners' "Justice No.1 Private Equity Fund." Korea Zinc acquired the Jeongseok Enterprise stake when One Asia Partners liquidated this private equity fund in 2023.

The profit Korea Zinc earned from its four-year investment in Jeongseok Enterprise shares was about 3.9 billion won. Taking into account the management fees and capital gains tax paid to One Asia Partners, the internal rate of return (IRR) is estimated to be below 3%. This is lower than the four-year average yield of the risk-free five-year government bond. In effect, Korea Zinc lent inheritance tax funding to Hanjin Group at an interest rate in the 3% range.

Yongpoong and MBK also pointed out last year that Chairman Choi repeatedly made excessive investments in One Asia Partners by utilizing personal relationships. In particular, they raised suspicions that the Jeongseok Enterprise stake investment was a "parking deal" intended as financial support between conglomerates. At the time, Chairman Choi's side countered that it was a normal investment in a company with investment value.

Yongpoong and MBK stated, "The Jeongseok Enterprise investment is a representative example of Chairman Choi misappropriating the company's valuable funds for his personal purposes by investing in a company completely unrelated to Korea Zinc's main business, and was one of the core suspicions regarding One Asia Partners." They added, "By making a deal that merely returned the principal after four years, it has been proven in the market that this was a stock parking transaction, as has long been suspected."

Choi Yunbeom, chairman of Korea Zinc, is drinking water at the Korea Zinc press conference held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on the 13th. On the same 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