Young Poong: "JV Retains Stake Even If Contract Fails...Abnormal Structure"
Korea Zinc: "U.S. Government Tax Subsidies Total 2 Trillion Won"
As the court’s decision on the injunction filed by MBK Partners and Young Poong regarding Korea Zinc’s third-party paid-in capital increase for its steel plant investment in Tennessee, USA, is imminent, both sides have continued to clash.
On December 21, MBK Partners and Young Poong claimed in a press release, "It has been confirmed that, even if the final joint venture agreement is not signed for Korea Zinc’s U.S. smelter construction, there exists an abnormal structure in which the joint venture (JV) will still retain a 10% stake in Korea Zinc." MBK Partners and Young Poong raised concerns that the "business partnership framework agreement" signed between Korea Zinc and the U.S. side does not include any provisions regarding the effectiveness, redemption, or cancellation of the new shares to be issued by Korea Zinc.
MBK Partners and Young Poong stated, "In a typical joint venture, new shares are issued only after the rights and obligations are clearly defined through a final contract. However, in this case, new shares are being issued before the final contract is signed, which allows the JV to secure its stake regardless of whether the contract is ultimately concluded." They criticized the structure by adding, "Even if the final contract falls through, Korea Zinc would have no legal means to reclaim the shares, resulting only in the dilution of existing shareholders’ stakes."
They further clarified, "We are not opposed to building a smelter in the United States itself," but pointed out, "The problem lies in the fact that the agreement imposes obligations solely on Korea Zinc, and there is no way to recover the already allocated Korea Zinc shares regardless of whether the final contract is signed."
Korea Zinc also issued a press release that day, emphasizing the legitimacy of the project based on substantial support from the U.S. government. Korea Zinc stated, "This project is a strategic investment that can simultaneously enhance the company’s mid- to long-term growth and profitability amid changes in the global critical minerals market environment," and added, "With the full support of the U.S. government, the business potential will be maximized."
Korea Zinc highlighted that the U.S. government will provide a 10% tax credit on manufacturing costs under the Inflation Reduction Act (IRA), and that the "One Big Beautiful Bill Act" (OBBBA) allows for immediate expensing of large-scale capital expenditures (CAPEX) through a bonus depreciation system, significantly reducing the initial tax burden. Additionally, Korea Zinc explained that, when combining various tax benefits and incentives from federal and state governments, the total support amounts to 1.442 billion dollars (approximately 2.13 trillion won), calling this "an important factor supporting the business viability of the smelter project."
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