Korea Zinc Conducts Stock Buyback to Prevent Takeover
Korea Zinc successfully repurchased 9.85% of its shares, valued at $1.5 billion, as a strategic move to prevent a takeover. This action is part of the company's efforts to discourage shareholders from selling their stakes, particularly in relation to its largest investor, Young Poong, and private equity firm MBK. Moreover, as stated in a regulatory filing, Bain Capital, which supports Korea Zinc's current leadership, purchased an additional 1.41% stake in the company.
As the world's largest zinc refining facility, Korea Zinc is embroiled in a contentious battle for control of its $18 billion empire against the founding Chang family. The Chang family, which manages the Young Poong conglomerate, initially partnered with MBK to make a joint bid in September. Despite the recent stock buyback and support, the backing for Korea Zinc's management still falls short of the total 38.5% stake held by MBK and Young Poong.
Prior to the buyback, the Choi family, which runs Korea Zinc, had the backing of shareholders owning up to 36% of the company, including strategic partners like Hyundai Motor Group. The company announced that the $1.5 billion spent on the buyback will lead to the cancellation of the newly acquired shares, aiming to enhance shareholder value. This move will not increase the Choi family's stock percentage relative to their competitors, and currently, no party holds a decisive majority of shares that would be definitive in a proxy battle.
Today, Korea Zinc's shares surged to an all-time high, showing an increase of 11.7% to 1.4 million won, significantly above the buyback price of 890,000 won. The session ended with a record closing up 3.8%. This rise in share price is attributed to a reduced number of tradable shares due to bid offers from both sides. Shares of Young Poong also rose, closing up 7.45%.
In light of these developments, MBK has nominated 14 new executive candidates for Korea Zinc, which currently has 13 board members, and is pushing for an extraordinary shareholder meeting. The fund aims to propose a new governance system that separates management from the board. Additionally, MBK criticized the financial impact of Korea Zinc's recent share buyback.
Various shareholders, such as Hyundai Motor, Hanwha Group, and LG Chem, which appear likely to support the Choi family, have yet to disclose their positions. The National Pension Service of South Korea owned a 7.83% stake in Korea Zinc at the end of June and could play a key role in the ongoing dispute. The world's third-largest pension fund has not yet revealed its stance on the matter.