Korea Zinc to issue new shares amid ongoing business feud

A visitor enters the lobby of Korea Zinc at its headquarters in downtown Seoul, Wednesday, where the zinc smelter convened an emergency board meeting. Yonhap

Korea Zinc announced, Wednesday, that it will issue new shares that will account for about 20 percent of all shares currently traded on the market.

The announcement comes as the world’s largest zinc smelter's management is trying to fend off a takeover attempt by a coalition of its biggest shareholder, Young Poong, and private equity firm MBK Partners.

Neither Korea Zinc nor the Young Poong-MBK Partners coalition held a clear advantage over the other following recent tender offers made by both sides to secure a larger stake in Korea Zinc and gain management rights to the company.

The tender offer was triggered by a business dispute as a result of a breakdown in the long-standing partnership between Young Poong and Korea Zinc.

Korea Zinc Chairman Choi Yun-beom, his family and their allies collectively hold a 35.4 percent stake in the smelter.

The Young Poong side owns a 38.47 percent stake in Korea Zinc.

Under the circumstances, Korea Zinc said it plans to issue a total of 3.73 million shares to raise 2.5 trillion won ($1.8 billion).

The subscriptions are scheduled from Dec. 3 to Dec. 4, with each share priced at 670,000 won.

“The amount of new shares to be issued is about 20 percent of the shares currently traded on the market,” Korea Zinc said in an emergency board meeting.

The company said it will assign 20 percent of the new shares for subscriptions by employees on Dec. 3.

It added that the cash raised by issuing new shares will be used for investments in secondary batteries and other national strategic technologies, and to redeem debt.

“We want to broaden our shareholder base by inviting diverse investors — from small shareholders to institutions and the general public — and turn Korea Zinc into a ‘people’s enterprise,'” the company explained.

In a press release, MBK Partners criticized Korea Zinc for “violating the order of the market and hurting the interest of the shareholders.”

“It’s deplorable that Chairman Choi is looking down on the capital market and shareholders by newly issuing shares,” the private equity firm said.

It went on to say that Choi had already “inflicted tremendous damage” on the smelter by buying back the company’s shares at 890,000 won in its respective tender, which was 60,000 won more than the price offered by the coalition.

MBK Partners also said issuing new shares is a response to make up for losses from such an expensive tender offer.

“In that regard, Choi is confessing that he committed a breach of trust,” it added.