(2nd LD) Korea Zinc to buy back own shares worth 2.66 tln won to fend off MBK, Young Poong

Korea Zinc Inc. said Wednesday it will buy back 2.66 trillion won (US$2 billion) worth of its own shares in a rare counteroffer to fend off a tender offer by private equity firm MBK Partners and Young Poong, the biggest shareholder of the world’s largest zinc smelter.

Korea Zinc Chairman Choi Yun-beom told reporters the counteroffer was a “desperate decision” to dispel concerns from shareholders, employees and contractors amid an intensifying battle for the company’s management control.

In the nation’s capital market, Korea Zinc’s move marked the first corporate saga where a company makes a counteroffer to thwart a tender offer.

At a board of directors meeting, Korea Zinc decided to repurchase and cancel 3.2 million shares at a price of 830,000 won per share, starting from Friday and running until Oct. 23.

Shares of Korea Zinc closed at 713,000 won on the Seoul bourse, up 3.63 percent from the previous day, far outperforming the broader Korea Composite Stock Price Index’s 1.22 percent drop.

Choi Yun-beo
m, chair of Korea Zinc Inc., speaks during a press conference in Seoul on Oct. 2, 2024. (Yonhap)

Choi Yun-beom, chair of Korea Zinc Inc., speaks during a press conference in Seoul on Oct. 2, 2024. (Yonhap)

Korea Zinc said U.S. private equity firm Bain Capital will invest 430 billion won to acquire a 2.5 percent stake in the Korean zinc smelter by participating in the counteroffer.

“Bain Capital is a purely financial investor and will not be involved in the management or board of directors of Korea Zinc,” Choi told reporters. “Bain Capital is actively supporting the future business direction of Korea Zinc, which will be led by the current management team.”

Choi added that the combined bid by Korea Zinc and Bain Capital will total 3.72 million shares, or 18 percent of the company’s total outstanding shares, valued at 3.1 trillion won.

“We plan to cancel all the shares acquired by Korea Zinc in order to firmly enhance shareholder value,” Choi said. “This decision was made to swiftly resolve the disruption i
n the capital market, and the uncertainty surrounding the company’s vision and future.”

Korea Zinc’s counteroffer is widely expected as a Seoul court dismissed an injunction requested by Young Poong, allowing the company to buy its own shares.

Right after the court decision, Korea Zinc hailed the court’s ruling, saying it confirms the company’s plan to buy its own shares as a “legitimate act” to thwart a “hostile M and A” by MBK and Young Poong.

MBK, in cooperation with Young Poong, raised last week its original tender offer price for Korea Zinc to 750,000 won per share from 660,000 won.

This photo shows Korea Zinc Inc.’s Seoul headquarters on Oct. 2, 2024. (Yonhap)

This photo shows Korea Zinc Inc.’s Seoul headquarters on Oct. 2, 2024. (Yonhap)

Meanwhile, Young Poong said it filed for a new injunction to halt Korea Zinc’s buyback process.

The company claimed that the Korea Zinc board of directors’ decision to buy back its own shares is a breach of trust because its share price, which has been rising sh
arply following MBK’s tender offer, will probably drop after the buyback.

Young Poong and MBK have criticized Korea Zinc’s current leadership, accusing it of weakening the company’s financial health.

The battle for management control of Korea Zinc has heated up as MBK teamed up with Young Poong and launched a public tender offer in mid-September to acquire a stake of up to 14.61 percent in the smelter.

Young Poong and investors supportive of it controlled a 33.13 percent stake, while Korea Zinc Chairman Choi Yun-beom and his supporting investors controlled a 33.99 percent stake, according to industry sources.

The corporate logos of Korea Zinc Inc. (L) and Young Poong Corp. are seen in these photos provided by the companies. (PHOTO NOT FOR SALE) (Yonhap)

The corporate logos of Korea Zinc Inc. (L) and Young Poong Corp. are seen in these photos provided by the companies. (PHOTO NOT FOR SALE) (Yonhap)

MBK and Young Poong have planned to gain a controlling stake in Korea Zinc after buying at least a 7 percen
t stake in the smelter.

The tender offer by MBK is worth 2.2 trillion won.

If Korea Zinc buys back a 7 percent stake through a planned counteroffer, Choi may seize the chance of victory in the management battle, some analysts said.

The ongoing conflict marks the end of decadeslong cooperation between Young Poong and Korea Zinc, which were co-founded in 1974 by Chang Byung-hee and Choi Ki-ho.

Since the founding, the Choi family has managed Korea Zinc, while the Chang family is in charge of Young Poong and other electronic parts affiliates.

Tensions escalated in 2022 when Choi Yun-beom, grandson of co-founder Choi Ki-ho, became chairman of Korea Zinc and sought to separate the company from Young Poong, sparking the current battle for control.

Source: Yonhap News Agency