Korea Zinc offers olive branch as MBK Partners signals war for control to continue

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Korea Zinc offers olive branch as MBK Partners signals war for control to continue

Published: 24 Jan. 2025, 18:28 Updated: 26 Jan. 2025, 17:36

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

Korea Zinc CEO Park Ki-deok speaks during a press conference at the Grand Hyatt Seoul in Yongsan District, central Seoul, on Jan. 24. [KOREA ZINC]

Korea Zinc held out an olive branch to MBK Partners on Friday by offering to accept the private equity firm as a "partner" and end their five-month brawl.

The conciliatory gesture came a day after Korea Zinc’s board approved a motion to cap its board members to 19, a critical factor that could defend Chairman Choi Yun-beom from losing his position by restricting Young Poong from exercising its 25 percent voting right during the meeting.

“We offer a compromise to MBK Partners to accept it as our new partner, no longer an enemy, and through this unity, I believe we will be able to cultivate a better future,” said Korea Zinc CEO Park Ki-deok during a press conference Friday at the Grand Hyatt Seoul in Yongsan District, central Seoul, accompanied by Korea Zinc Vice Chairman Lee Je-joong and Shin Bong-chul, vice head of the company's labor union.

“We are considering offering MBK chances to join our board and possibly participate in the management, and further details can be discussed if we can begin an in-depth discussion,” Park added. “MBK is a successful equity firm, and its deep understanding of financial capital can create synergy with Korea Zinc’s expertise in industry.”

Park did not mention Young Poong in his remarks, adding that he would like to refrain from speaking about the company and that it doesn’t plan to restore its voting rights.

“But if MBK doesn’t accept our suggestion and continues this exhausting war, we, Korea Zinc, with all our employees, including engineers and laborers, will never dodge it,” Park added.

From left, Korea Zinc Vice Chairman Lee Je-joong, CEO Park Ki-deok and Shin Bong-chul, vice head of the company's labor union, speak during a press conference at Grand Hyatt Seoul in Yongsan District, central Seoul, on Jan. 24. [KOREA ZINC]

Park also strongly refuted MBK-Young Poong’s argument that a Korea Zinc subsidiary’s acquisition of Young Poong shares violated Korea’s fair trade laws.

Korea Zinc on Thursday limited Young Poong’s voting power, citing “cross-shareholding structure” regulations after Sun Metals (SMC), the smelter’s Australian subsidiary, on Wednesday acquired 10.3 percent of Young Poong stakes for 57.5 billion won ($40 million).

Article 369 of Korea’s Commercial Act specifies that if more than one-tenth of the total number of issued shares of a firm is held by a company, its parent or subsidiaries, or by a subsidiary alone, the firm in question has no voting rights for shares in the aforementioned company or parent company.

“There were no ‘illegalities’ in the process, I can certainly say, and the court will reveal all if they wish to launch any legal actions,” Park said.

However, Park’s effort to build consensus will likely face a few hurdles as MBK Partners Vice Chairman Kim Kwang-il publicly said the smelter’s actions violate fair trade laws, and vowed to file a lawsuit to nullify the resolutions passed at the meeting, rejecting Choi's offer for MBK's participation in the board.

“Choi, just to protect his management rights, sold off Young Poong shares at 30 percent off prices to involve SMC in this battle,” Kim said during an online press conference Friday morning. “Choi and Park were excluded from SMC’s board, proving they knew their share transaction was problematic."

“We will apply for an injunction with the court to invalidate all decisions made in yesterday’s shareholder meeting and file a criminal complaint against Choi to get him to step down from his position.”

Kim also expressed his intention to continue his company's battle with Korea Zinc.

“Choi wants us to give up, but we got plenty of time and substantial funds,” Kim added. “I will do my best to be included in the board and concentrate all my strength.”

The two’s ongoing feud started in September after Young Poong partnered with MBK Partners to launch a tender offer to take control of the management rights.

Korea Zinc’s Choi, currently losing in the stake game, intended to add seven new directors to its board, while Young Poong's coalition with MBK has nominated 14.

MBK’s goal crashed after Korea Zinc's board approved the motion to limit the maximum number of boards to 19 during Thursday's extraordinary shareholder meeting. Korea Zinc’s board currently has 12 members, 11 of whom are allies of Choi.

Korea Zinc plans to hold a regular shareholder meeting on March 19.

BY SARAH CHEA [[email protected]]