FSS warns 'stern response to any illegal measures' in Korea Zinc, MBK Partners conflict

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FSS warns 'stern response to any illegal measures' in Korea Zinc, MBK Partners conflict

Published: 29 Sep. 2024, 17:42

SARAH CHEA
chea.sarah@joongang.co.kr

Financial Supervisory Service Gov. Lee Bok-hyun speaks during a seminar on governance reform for the corporate value-up initiative held in western Seoul in June. [YONHAP]

Financial Supervisory Service (FSS) Gov. Lee Bok-hyun has warned of a stern response to any illegal practices regarding Korea Zinc's heated management control battle with Young Poong and private equity firm MBK Partners.

"The ongoing dispute must be thoroughly monitored, as excessive competition could cause market instabilities and hamper the confidence of the capital market," FSS chief Lee said during a meeting with officials Friday.

"We will launch a stern response to any illegal measures in the conflict, such as any market disturbances that may cause investors' misjudgments and misunderstanding."

The battle surrounding management control of Korea Zinc has been accelerating recently, as MBK Partners teamed up with Young Poong, Korea Zinc's biggest shareholder with 33.13 percent stake, to launch a tender offer to acquire up to 14.61 percent of the world’s largest refined zinc supplier.

The initial tender offer price for shares in Korea Zinc was set at 660,000 won ($495) per share, but was raised to 750,000 won last week.

Korea Zinc has strongly opposed MBK Partners' share purchase, calling it a "hostile takeover bid."

Despite the FSS's warning, Korea Zinc and MBK Partners immediately issued statements attacking each other's actions, adding that they fully understand the FSS's concern.

"Groundless rumors and hearsay are spreading, such as MBK is a China-based company and it is willing to sell the Korean Zinc to a Chinese company with an intention to leak technologies to China," the private equity firm said in a statement.

Korea Zinc said MBK's increase of the initial tender offer price is "an act of causing a market disturbance," and ordered it to "halt spreading unfounded rumors to damage its value."

The management dispute spiked after incumbent Korea Zinc Chairman Choi Yun-beom took office in 2022 and began actively seeking partnerships with third parties, such as Hyundai Motor Group and LG Chem, in its move to expand their portfolio to EV materials. 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 SARAH CHEA [chea.sarah@joongang.co.kr]