Key engineers of Korea Zinc threaten to resign if takeover bid succeeds

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Key engineers of Korea Zinc threaten to resign if takeover bid succeeds

Published: 24 Sep. 2024, 18:34 Updated: 24 Sep. 2024, 18:36

SHIN HA-NEE
shin.hanee@joongang.co.kr

Korea Zinc Chief Technical Officer and Vice Chairman Lee Je-joong, center, chants along with key engineers of the zinc smelter, during a press conference held at Korea Zinc's headquarters in central Seoul on Tuesday. [NEWS1]

The chief technical officer (CTO) and key engineers of Korea Zinc, the world’s largest refined zinc supplier, declared that they will resign if the 2 trillion won ($1.5 billion) tender offer launched by private equity firm MBK Partners and Young Poong succeeds, standing in support of the company’s current management and Chairman Choi Yun-beom.

The comment was made on Tuesday during a press conference, as the two-way mudslinging by Korean Zinc and its largest shareholder, Young Poong, continues to escalate amid a power struggle between two founding families of the zinc supplier.

“I stand here today to protect Korea Zinc, the country’s pride that we have built with our blood and sweat over the past 50 years, and to expose the injustice of MBK Partners’ hostile takeover attempt,” said Korea Zinc CTO and Vice Chairman Lee Je-joong during the conference held at the company’s headquarters in central Seoul, where he was joined by 20 senior engineers of the firm.

Lee, who has been with Korea Zinc since 1985, is the first senior executive to publicly address the ongoing conflict in a press conference.

MBK Partners, which is seeking to acquire additional shares of Korea Zinc to secure controlling rights along with Young Poong, “is only after money,” stressed Lee, while also calling out Young Poong adviser and de facto chief Chang Hyung-jin, the son of the late Young Poong and Korea Zinc co-founder Chang Byung-hee.

“Shame on you, Chang Hyung-jin,” said Lee. “He has caused environmental damage and an industrial disaster at the Seokpo smelter with faulty management, and now has his eye on Korea Zinc hand-in-hand with a corporate raider and speculative capital firm.”

Lee accused Young Poong and MBK of attempting to steal Korea Zinc’s technological capabilities in pursuit of financial gains only, suggesting that the private equity firm, which would be the largest shareholder if the tender offer succeeds, may eventually sell the company to a Chinese buyer, though the claim has been repeatedly refuted by MBK.

Moreover, Lee accused the Young Poong chief of trying to dispose of industrial waste through Korea Zinc’s production plant, which caused the initial fallout, according to the CTO.

"We, the engineers, will not remain in the company [if MBK and Young Poong succeed with their tender offer],” said Lee, asserting that MBK does not have the capability to run Korea Zinc in the first place.

Young Poong, which currently owns a 25.4 percent stake in Korea Zinc, seeks to acquire between 6.98 percent and 14.61 percent of the zinc smelter through a special purpose company jointly established with MBK Partners.

If the tender offer goes through, the two will hold up to a combined 47.73 percent stake in Korea Zinc, with MBK Partners holding one more share than Young Poong, effectively making it the largest shareholder.

Though the price was set at 660,000 won per share, the announcement drove the share price to 699,000 won as of Tuesday. MBK and Young Poong may up the price to incentivize shareholders to take the tender offer.

Meanwhile, MBK and Young Poong have been defending their takeover move while accusing Korea Zinc Chairman Choi, the grandson of the late co-founder Choi Ki-ho, of breach of duty and involvement in the alleged stock price manipulation of SM Entertainment.

"Describing the tender offer as a hostile takeover attempt is false, as it is conceptually impossible for the largest shareholder to initiate a hostile takeover,” said MBK in a statement released on Tuesday ahead of the press conference, stating that the offer was launched "in cooperation with the largest shareholder [Young Poong] to improve Korea Zinc's corporate governance.”

The private equity firm stressed that “there is no possibility that we would sell Korea Zinc to a Chinese buyer,” and also added, "What we are trying to do is rebuild the defunct management system that Chairman Choi ruined.”

"Korea Zinc needs to put an end to the era of the two families running the company, and adopt a professional management system that fits global corporate governance standards,” said MBK.

The management dispute emerged after incumbent Chairman Choi took office in 2022 and began actively seeking partnerships with third parties such as Hyundai Motor Group, LG Chem and Hanwha. As a result, partnership deals through stock swaps and rights offerings lowered Young Poong’s stake in Korea Zinc from 27.49 percent to 25.4 percent.

Young Poong, a non-ferrous metal supplier, was co-founded by the late Chang and Choi in 1949, and Korea Zinc, its sister company, was founded in 1974. The Chang family has been at the helm of Young Poong since, while the Choi family has handled Korea Zinc.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]