(123rf)
(123rf)

Korea Zinc, the world’s largest refined zinc producer, valued at $12 billion, is locked in a high-stakes battle for managerial control that could impact South Korea’s economy and global supply chains.

Korea Zinc Chairman Choi Yoon-beom (Newsis)
Korea Zinc Chairman Choi Yoon-beom (Newsis)

Key players

  • Korea Zinc (Choi family): Founded in 1974 and managed by the Choi family, Korea Zinc has diversified under CEO Choi Yoon-beom, moving into battery materials and renewable energy.
  • Young Poong Group (Chang family): The company's largest shareholder, operating the Seokpo smelter and facing financial difficulties. Allied with MBK Partners, a private equity firm known for facilitating major deals in South Korea.
  • Bain Capital: Allied with the Choi family to defend Korea Zinc from a takeover.

Conflict origins:

The feud traces back to the late 2010s when Young Poong increased its influence over Korea Zinc through restructuring, creating tension with CEO Choi Yoon-beom. The conflict escalated when Korea Zinc stopped processing sulfuric acid by-products from Young Poong’s Seokpo smelter, citing safety and cost concerns.

By September last year, the battle reached a boiling point when Young Poong-MBK launched a $1.7 billion tender offer to acquire more Korea Zinc shares. Korea Zinc countered with a share buyback, raising its stake to 35.4 percent with Bain’s support.

On Nov. 11, MBK purchased an additional 1.36 percent, bringing the Young Poong-MBK alliance to 39.83 percent ownership, but still leaving no clear winner.

Recent developments:

  • Seokpo plant shutdown: On Nov. 1 last year, South Korea’s Supreme Court ordered Young Poong’s Seokpo smelter to close for two months over unauthorized wastewater discharges, potentially weakening its position.
  • Capital raise scrapped: Korea Zinc canceled a controversial share sale on Nov. 13 last year, following a backlash and regulatory scrutiny. CEO Choi Yoon-beom also stepped down as board chairman.
  • NPS sells stake: On Jan. 6, the state-run National Pension Service reduced its ownership in Korea Zinc from 7.49 to 4.51 percent, signaling a reduced role as a potential swing vote.

What’s at stake:

  • Economic and industrial impact: Korea Zinc produces 85 percent of South Korea’s zinc, vital for steelmaking and semiconductors. Prolonged instability risks major supply chain disruptions.
  • Global relevance: Korea Zinc is crucial to reducing reliance on Chinese metals, aligning with US strategic goals.
  • Governance concerns: The fight exposes flaws in South Korea’s chaebol system, where family-run conglomerates often prioritize internal power dynamics over stakeholder value.

Risks

Korea Zinc risks draining its finances with further buybacks, while Young Poong-MBK’s potential control raises concerns over prioritizing short-term gains. The stock remains volatile, with recent surges past 1.3 million won per share and daily fluctuations exceeding 15 percent.

What’s next?:

The decisive moment is expected at the extraordinary shareholders’ meeting on Jan. 23, where leadership control may be determined. Korea Zinc may cancel repurchased shares to boost its stake to 40 percent, closing the gap with Young Poong-MBK.