MBK, Young Poong welcome court ruling against Korea Zinc's share issuance to Hyundai Motor affiliate

Korea Zinc shareholders line up to enter the extraordinary shareholders' meeting at the Grand Hyatt Seoul, Jan. 23. Joint Press Corps

A Seoul court ruled that Korea Zinc's issuance of new shares through a third-party allotment to HMG Global, an affiliate of Hyundai Motor Group, is invalid as it violated the firm's articles of incorporation, according to company and industry officials Sunday.

The MBK Partners-Young Poong alliance, Korea Zinc's largest shareholder and a long-time rival in the ongoing management rights dispute, welcomed the court's decision, while the world's largest zinc smelter said it plans to file an appeal.

With Korea Zinc stating its intention to appeal, the newly issued shares will remain valid until courts reach a final decision, meaning for now there will be no major shift in the dynamics of the ownership dispute.

On Friday, the Seoul Central District Court ruled in favor of Young Poong in its lawsuit against the zinc smelting firm over the validity of the share issuance.

The court found that the issuance violated the rights of existing shareholders, invalidating approximately 1 million common shares issued on Sept. 13, 2023.

The MBK-Young Poong alliance called the ruling "a reaffirmation of the legal authority of Korea Zinc's articles of incorporation and the importance of protecting shareholder rights."

It criticized Korea Zinc Chairman Choi Yun-beom and the firm's management for pushing through the third-party allotment in violation of the procedures outlined in the articles.

"Choi and other top company managers must take responsibility for the unlawful share issuance by apologizing to all affected stakeholders and working to repair the damage," a Young Poong official said. "As Korea Zinc's largest shareholder alongside MBK Partners, we will continue to take firm action in accordance with the law to prevent any unfair infringement of shareholder rights."

HMG Global purchased newly issued Korea Zinc shares for 527.2 billion won ($386 million) as part of an agreement to collaborate in the electric vehicle battery business. The deal gave Hyundai Motor Group a 5 percent stake in Korea Zinc and a seat on its board.

Young Poong filed a lawsuit challenging the validity of the share issuance amid the battle over control of Korea Zinc. Young Poong argued that the issuance was designed to help Choi maintain control rather than to serve any genuine business need, and that it excluded existing shareholders from the process.

Korea Zinc, however, refuted the claim, saying the share issuance was necessary to advance its business strategy and was in compliance with legal procedures.