(Bloomberg) -- Korea Zinc Co. is still considering whether to press ahead with a disputed $1.8 billion share sale plan but will take into account the concerns raised by regulators and its own investors, the company said on Tuesday.
Shareholders had been anticipating an update from the company alongside its quarterly earnings, two weeks after Korea Zinc surprised the market with a bumper share issue on the heels of a hefty buyback, promptly triggering an investigation by the financial watchdog and a sell-off in its stock.
Korea Zinc said it had told analysts during its earnings call that it was “seriously considering” the worries regulators and shareholders had expressed, and would make an announcement after further internal discussions and reviews. Executives did not provide detail on timing, though local media have reported that the board will likely meet Wednesday to decide on whether or not to proceed.
The world’s largest producer of refined zinc has been caught in a months-long battle between two major shareholder groups, pitting the company’s chairman, Choi Yun-beom, against its largest shareholder.
Under Choi’s plan, shares would be sold at an indicative price of about 670,000 won apiece, more than 33% below the current market price, with most of the proceeds earmarked to pay down debt. But the move, perceived as an effort to garner more shareholder support, rattled investors and has raised fresh questions about corporate governance.
The long-simmering fight for control of Korea Zinc burst into public view in September, after private equity firm MBK Partners Ltd teamed up with Korea Zinc’s biggest shareholder Young Poong Corp. to launch an unsolicited bid.
MBKP and Young Poong now control 39.8% of the company, vital to global efforts to loosen China’s grip on the supply of metals for the energy transition. The rival camp, which includes Choi and is backed by private equity firm Bain Capital, owns about 35% of the company after the share buyback concluded last month.
Korea Zinc’s third-quarter operating profit came in at 149.98 billion won ($107 million), down 6.5% from a year ago despite higher revenue as weak metal prices hit. An average of five analyst estimates had put the expected figure at 266.5 billion won. The company said earnings would improve into the last quarter.
“Fundamentally, the recent strength in LME metal prices should bode well for its 4Q24 earnings,” James Hong, an analyst at Macquarie Securities Korea Ltd. “Furthermore, operational suspension at Young Poong, another major zinc smelter in duopoly market, should help Korea Zinc to grow market share,” he added.
Even for South Korea, where succession fights among wealthy business families are common, the spat over Korea Zinc stands out for its public nature and for the role played by private equity. Repercussions will be felt by other wealthy families in the country, many of whom have had their business empires come under criticism for lack of transparency, and questionable corporate governance.
After falling at the open on Tuesday, Korea Zinc traded up as much as 5.3%, outperforming the benchmark Kospi. At around 12:24 p.m. in Seoul, the stock was changing hands at 1,186,000 won, up 5.4%. The shares have nearly doubled since September, making it one of the Seoul’s most valuable companies.
--With assistance from Sangmi Cha.
(Recasts first paragraph with fresh comments from Korea Zinc, adds analyst quote in ninth paragraph, update shares in last paragraph)
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