Korea Zinc seeks 'core technology' designation in latest attempt to block takeover

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Korea Zinc seeks 'core technology' designation in latest attempt to block takeover

Published: 10 Dec. 2024, 18:20 Updated: 10 Dec. 2024, 19:16

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

Korea Zinc Chairman Choi Yun-beom tours the company's refining facilities in Onsan, Ulsan, in November. [KOREA ZINC]

[NEWS IN FOCUS]

Korea Zinc’s brutal management control feud with its largest shareholder, Young Poong, and private equity firm MBK Partners, has taken a new turn with the smelter's attempt to list its refining technologies among Korea’s national core technologies.

The world’s largest zinc smelter said last month it had submitted an application to the Ministry of Trade, Industry and Energy to add two of its refining technologies in zinc smelting to the list of Korea’s national core technologies, in addition to a high-nickel precursor technology that had already received the designation in November.

Under Korean law, domestic companies with such designations cannot be acquired by a foreign company without the Industry Ministry's approval.

The move would potentially impact the MBK Partners’ future decisions regarding its stake in Korea Zinc.

Though MBK has said that it has “no plans” to sell its shares to China specifically, industry concerns are growing regarding the inevitability of a sell-off to an overseas entity due to the lack of domestic players who could viably purchase Korea Zinc, which has an estimated market capitalization of 20 trillion won ($14 billion).

Korea Zinc Chairman Choi Yun-beom speaks during a press conference in central Seoul in November. [NEWS1]

Korea Zinc’s ‘national core technologies’
Korea Zinc’s latest application concerns its hematite manufacturing technology, a way to extract iron in the process of zinc smelting, and antimony metal manufacturing technology, which can reduce air pollutant emissions and improve economic feasibility.

Korea Zinc is the world’s largest zinc smelter, accounting for around 10 percent of the world’s zinc production. The Korean company produces around 1.2 million tons of some 10 types of nonferrous metals including zinc, lead and copper.

The Industry Ministry is currently in the process of reviewing the application. So far, a total of 76 technologies in 13 fields, including chips, automobiles, robotics and aerospace, are designated as national core technologies.

Korea Zinc’s precursor manufacturing and refining technology, which got onto the list recently, is a key material in the production of cathodes, the most expensive ingredient in the making of EV batteries. Its precursor consists of more than 80 percent nickel content that can translate to EVs with high energy density and output.

Localizing precursor technology is essential to reduce Korea’s reliance on China, which reached 97 percent last year, as the country currently controls 90 percent of raw materials market.

“Korea Zinc’s operating profit rate stayed at some 12.8 percent over the last decade by importing raw materials, those that don’t originate from Korea, from overseas, and this could not be realized without an expertise in management based on full understanding of the technology,” Korea Zinc Chief Technology Officer and Vice Chairman Lee Je-joong said at a conference in September, backing Korea Zinc Chairman Choi Yun-beom in the ongoing dispute.

Lee criticized MBK Partners’ takeover attempt as a “hostile movement” adding that “the takeover will eventually lead to leakage of our key technologies to foreign countries, which will collapse Korea’s industrial competitiveness.”

MBK issued a statement welcoming the Korean government’s designation decision and said it would “do its best to endeavor constant growth and not leak any key technologies overseas.”

Financial Supervisory Service Gov. Lee Bok-hyun speaks about his thorough monitoring of MBK Partners and Young Poong's attempted takeover of Korea Zinc in an interview on Nov. 28 in central Seoul. [NEWS1]

Financial watchdog’s close eye
Financial Supervisory Service (FSS) Gov. Lee Bok-hyun also has a close eye on the intensifying conflict. Lee has expressed concerns regarding the side effects of the takeover.

“An industry must be run in the long term of around 20 to 30 years, but if a financial firm that has a structure of liquidating business in five to 10 years controls our capital, this could undermine shareholder value,” Lee said in an interview on Nov. 28.

“Possible side effects should be considered.”

Lee’s remarks followed reports that no rules outlined in MBK's agreement with Young Poong restricted the dumping of its stake to a certain time period, meaning the private equity firm could exit the deal at any time it wants.

“So far [MBK] has not persuaded the market or authorities. Blaming the other party cannot be the main ground for their own governing reasons,” Lee said in a recent Bloomberg interview.

The country’s top financial regulator, on Oct. 15, launched a review of Young Poong for possible accounting irregularities regarding its environmental violations. Violations were detected, and the review has turned into a compulsory investigation.

Korea Zinc and the MBK Partners-Young Poong coalition have been in a monthslong battle to secure stakes in the zinc smelter, with both parties having launched competing tender offers in an effort to secure voting rights.

The coalition, so far, owns 40 percent of Korea Zinc, while some 35 percent is held by Choi and his allies.

Korea Zinc is scheduled to hold a shareholder meeting on Jan. 23, during which stakeholders will vote on 14 new board members recommended by the Young Poong coalition.

BY SARAH CHEA [[email protected]]