(2nd LD) Korea Zinc completes buyback; extended battle for management control ahead

Korea Zinc Co. said Monday it, together with Bain Capital, has acquired an 11.26 percent stake in the world's biggest zinc smelter in a buyback aimed at defending its management control from a multibillion-dollar takeover attempt. Korea Zinc originally sought to repurchase as much as 20 percent of the stock at 890,000 won (US$640) apiece in a battle over the smelter's control with Young Poong Corp., the company's biggest shareholder, and private equity firm MBK Partners. In their tender offer earlier this month, Young Poong and MBK secured a 5.34 percent stake in Korea Zinc at 830,000 won per share, bringing their overall stake to 38.47 percent. The buyback brought the stake held by Korea Zinc Chairman Choi Yun-beom and related parties to 29.32 percent from the previous 18.06 percent, the company said in a regulatory filing. Before the buyback, Choi had the backing of shareholders with a combined total of about a 34 percent stake. To enhance shareholder value, Korea Zinc will cancel a 9.85 percent stake as promised. Bain's 1.41 percent stake will serve as friendly shares, the company said in a statement. With Bain's stake, Korea Zinc's friendly stocks stand at 35.4 percent. "Korea Zinc expects its friendly shares, including the Choi family's, to reach over 40 percent after the planned cancellation, which is tantamount to the Young Poong side's estimated 42 percent," a company spokesperson said over the phone. Hyundai Motor Group, LG Chem Ltd., and units of Hanwha Group are also regarded as white knights. But the National Pension Service (NPS) is often regarded as a neutral shareholder. Korea Zinc said it is considering securing more treasury stocks with voting rights and more friendly shares to fend off the Young Poong-MBK coalition. With Korea Zinc and the Young Poong side likely to continue their battle at shareholders meetings through next year, the NPS, which owns a 7.83 percent stake in the smelter, is widely expected to serve as the deciding vote. On Monday, the Young Poong camp said in a stateme nt that they will hold an extraordinary shareholders meeting for a fundamental change in Korea Zinc's board of directors and improved corporate governance. "We have sent the request for the general meeting to the company's board. The date is not fixed yet. If the board refuses to convene the meeting, we will ask the court to decide on the matter," a Young Poong spokesperson said by phone. In response to the buyback outcome, MBK said, "Some shareholders made the right decision by choosing not to sell their Korea Zinc shares for short-term gains." On Sept. 12, MBK, in partnership with Young Poong, announced its intention to acquire a stake of up to 14.61 percent in Korea Zinc. Since then, the coalition raised its offer price twice to 830,000 won a share. The coalition held a combined 33.1 percent stake in Korea Zinc before it submitted the tender offer. In response, Korea Zinc launched a counteroffer to buy back its own shares at a higher price, initially at 830,000 won per share and later increasing it to 890,000 won. In the counteroffer, Korea Zinc said it will repurchase its treasury stocks by Oct. 23 for cancellation to boost shareholders' value. Korea Zinc and Young Poong have been at loggerheads over the future direction of the smelter in the face of the energy transition. Choi has pushed for massive investments in renewable energy, EV battery materials and recycling to secure new growth drivers, which has been balked at by Young Poong, preferring strong dividends. MBK, one of North Asia's biggest buyout firms, has said it will maximize shareholder value by consolidating management rights, improving the governance structure and the worsening financial profile. Korea Zinc has argued the buyout firm may hand over the smelter to foreign companies and undermine the country's industrial competitiveness. Korea Zinc accounts for 4.5 percent of the world's refined zinc market in terms of its sole smelting plant in Korea. Zinc is mainly used in the galvanization process to prevent rust on vehicles, ships and construction equipment. On Monday, the news sent Korea Zinc 3.8 percent higher to 1,301,000 won and Young Poong up 7.5 percent to 396,500 won, far outperforming the broader Korea Composite Stock Price Index's 1.1 percent gain. Source: Yonhap News Agency