Korea Zinc mulls withdrawing disputed rights issue plan

Korea Zinc Chairman Choi Yun-beom speaks during a press conference in Yongsan District, Seoul, Oct. 2. Yonhap

Korea Zinc, the world's largest refined zinc smelter, on Tuesday hinted at the possible withdrawal of its disputed share sale plan currently under investigation by the financial regulator.

The company will hold an emergency board of directors meeting on Wednesday to decide whether to withdraw the current plan and come up with a revised plan at the request of the Financial Supervisory Service (FSS), a company spokesperson said over the phone.

Korea Zinc announced its plan on Oct. 30 to issue 3,732,650 shares, equivalent to about 18 percent of its outstanding shares, to raise 2.5 trillion won ($1.77 billion) at about 670,000 won apiece.

The unexpected share sale plan surprised the market because it was released just days after its hefty share buyback ended on Oct. 23, which was aimed at fending off a takeover bid by its biggest shareholder Young Poong and private equity firm MBK Partners.

The move was widely perceived as part of Korea Zinc's efforts to garner more treasury stocks with voting rights in the monthslong battle with the Young Poong side over its management control.

The FSS took issue with the smelter's rights issue plan, citing a lack of details surrounding the decision-making process that could harm the interests of investors under the current plan. The financial regulator reportedly sees it as constituting unfair trading if Korea Zinc planned to pay back the loans extended for the buyback with the proceeds from the share sale.

The company said in a statement that it intended to expand its shareholder base through the envisioned share issue to minimize possible disputes over its management control, but that it failed to anticipate investors' concerns or a correction request from financial authorities.

"We will make an announcement in the not too distant future after reviewing our shareholders' concerns and the regulator's request," the statement said.

Currently, Young Poong and MBK collectively own a 39.83 percent stake in Korea Zinc, while Korea Zinc Chairman Choi Yun-beom and related parties hold a 35.4 percent stake in the smelter.

On Tuesday, Korea Zinc shares rose 1.5 percent to 1,142,000 won, outperforming the broader Korea Composite Stock Price Index's 1.9 percent loss. (Yonhap)