Choi family fends off the MBK-Young Poong alliance, but tension remains far from over
A year into one of Korea’s fiercest corporate battles, Korea Zinc’s top management has defied the odds — preserving control of the world’s largest refined zinc producer against an aggressive takeover bid by private equity giant MBK Partners and former ally Young Poong.
Chair Choi Yun-beom and his allies, despite being outgunned in shares, have leveraged governance maneuvers, strategic partnerships and record earnings to keep control of the 18.8 trillion won ($13.5 billion) smelter.
The MBK-Young Poong consortium, however, is widely expected to continue pressing for influence over the board, making the shareholders’ meeting slated for March next year a key showdown.
What's happened
The conflict came to a head in September 2024 when Young Poong teamed up with MBK Partners to launch a tender offer for Korea Zinc. The coalition accused Chair Choi and the company’s top brass of “poor corporate governance,” claiming they could run the smelter more effectively.
Korea Zinc hit back with a counter-tender offer, denouncing the MBK-Young Poong move as a “hostile takeover.” Both sides continued to raise their bids, collectively pouring trillions of won into the offers.
The battle soon spilled into the courts, with each side filing dozens of lawsuits, complaints and injunctions. Over the past year, 24 lawsuits tied to the management feud have been lodged, five of which remain ongoing, according to filings made through the Financial Supervisory Service.
Though MBK-Young Poong held an upper hand in the proxy fight with a larger shareholding of Korea Zinc, the top management of Korea Zinc turned the tide in January, when it tied the hands of MBK-Young Poong by curbing their voting rights through a cross-shareholding structure.
Currently, Chair Choi and his allies hold a 33.9 percent stake, compared with 49.6 percent controlled by the Young Poong-MBK bloc. Despite owning nearly half of the shares, the consortium still lacks effective control as it falls short of a board majority.
What's left
In recent months, Chair Choi’s camp has been highlighting Korea Zinc’s role in advancing national interests. In August, it signed a memorandum of understanding with top defense contractor Lockheed Martin to supply strategic minerals. Choi even joined President Lee Jae Myung’s economic delegation to the US.
Despite the uncertainty associated with its managerial control, Korea Zinc posted consolidated sales of 7.65 trillion won in the first half of this year — a record high since its founding. Its operating profit margin for the first half reached 6.9 percent, up 0.9 percentage point from the full-year 2024 figure.
Yet the protracted proxy battle has taken a heavy financial toll on the smelter, straining its balance sheet.
In October, the management poured in 1.8 trillion won to repurchase Korea Zinc shares to increase its stake in the company. Korea Zinc pooled the funds by issuing 1 trillion won in privately placed bonds and 400 billion won in commercial paper to finance the buyback.
As a result, its total borrowings on a standalone basis soared from 410 billion won at the end of 2023 to 4 trillion won a year later, marking a tenfold increase.
The mounting financial strain has raised concerns that it could weigh on the company’s ability to pursue large-scale projects.
Still, Korea Zinc’s leadership points to record earnings and strategic tie-ups as evidence of its resilience and capacity to steer the company through uncertainty.
Meanwhile, MBK Partners is facing legal scrutiny over its troubled management of portfolio company Homeplus. While facing a rare multi-agency probe over the hypermarket chain management, another blow came with the recent hacking scandal at Lotte Card, in which MBK is the majority shareholder.
“Despite a backlog of pressing issues that need to be addressed, MBK is escalating its takeover campaign over Korea Zinc, which is unacceptable,” an official from the industry said.
“This approach has severely undermined confidence in the market and the industry.”
Against this backdrop, the regular shareholder meeting in March next year is set to be another major showdown for the feud.
The board currently consists of 19 members, though four are suspended, leaving 15 actively serving. Of these, 11 represent the Choi camp, while four are backed by the MBK-Young Poong alliance.
With the terms of six directors, including Choi himself, set to expire in March, MBK-Young Poong could seek to disrupt the balance of power. However, the cumulative voting system introduced this year is expected to give the Choi camp an upper hand in the board election.
silverstar@heraldcorp.com
