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MBK raises tender offer price to buy out Korea Zinc
Kim Kwang-il, center, a partner at MBK Partners, speaks during a press conference at Lotte Hotel Seoul, Sept. 19. Yonhap
By Jun Ji-hye
Private equity firm seeks to encourage participation of institutional investors
Private equity firm MBK Partners, which formed a coalition with Young Poong in a fierce battle over Korea Zinc’s management rights, raised the tender offer price for the world’s largest zinc smelter to 750,000 won ($580) per share from the 660,000 won, MBK said Thursday.
In addition, the tender offer price for the smelter’s key affiliate, Young Poong Precision, has been raised from 20,000 won per share to 25,000 won.
The previous day's closing prices for Korea Zinc and Young Poong Precision were 704,000 won and 22,750 won, respectively. However, following MBK's announcement on Thursday, these prices increased to 713,000 won and 24,950 won.
“The increased tender offer price of 750,000 won is 11.6 percent higher than the all-time high of 672,000 won since Korea Zinc’s listing,” an MBK official said.
The private equity firm agreed earlier this month to acquire 50 percent plus one share of Young Poong’s 33.1 percent stake in Korea Zinc and is conducting the tender offer for up to 14.6 percent of the zinc smelting firm’s shares.
The move is aimed at inheriting Young Poong’s position as Korea Zinc’s largest shareholder and ousting Chairman Choi Yoon-beom. The deadline is set for Oct. 4.
Currently, the Choi family holds a 15.6 percent stake in Korea Zinc.
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Based on the maximum target volume of 14.6 percent of shares, MBK’s tender offer amount has increased from 1.99 trillion won to 2.27 trillion won, becoming the largest tender offer in the country’s history.
The price increase is interpreted as a measure to maximize the participation of shareholders, especially institutional investors, who hold 47.6 percent of Korea Zinc’s shares.
MBK believes that institutional investors have been long-term investors in Korea Zinc, with their average acquisition cost estimated to be below 450,000 won. If these institutional investors participate in the tender offer, the private equity firm may be able to secure at least the minimum target quantity of 7 percent.
Korea Zinc Chief Technology Officer and Vice Chairman Lee Je-joong speaks during a press conference at Gran Seoul hotel, Tuesday, opposing MBK Partners’ tender offer. Joint Press Corps
Korea Zinc and Chairman Choi, meanwhile, have yet to disclose whether they will launch a counter-tender offer to defend the management rights and instead are closely monitoring the development of situations, at least until MBK’s tender offer concludes on Oct. 4.
This approach comes as, although MBK raised the tender offer price once, there remains the possibility that it may adjust the offer price again and extend the tender offer period.
However, many in the market anticipate that Korea Zinc will eventually launch its counter-tender offer, striking back against the MBK-Young Poong coalition.
The zinc smelter has already broken away from its tradition of debt-free management by unusually deciding to issue commercial papers (CPs) to secure 400 billion won. The firm issued CPs worth 200 billion won on Tuesday and plans to raise an additional 200 billion won in CPs.
Korea Zinc said that it issued CPs as planned to secure operating funds, but the market interprets that these funds could be used to defend its management control.