(Bloomberg) -- MBK Partners and the top shareholder of Korea Zinc Co. jointly launched a tender offer to buy a controlling stake in the world’s biggest refined zinc producer valuing the company at 13.7 trillion won ($10.3 billion).
Shares of Korea Zinc surged as much as 24% — the most on record — after the two disclosed to acquire up to a 14.6% stake in the refined zinc producer. MBK, one of North Asia’s biggest buyout firms, and Young Poong Corp. announced their initial plans late Thursday, saying it was aimed at improving Korea Zinc’s corporate governance and corporate value.
The proposed deal comes as tensions over management control of Korea Zinc have grown in recent years. Since Choi Ki-ho and Chang Byung-hee co-founded Young Poong more than 70 years ago, the families have built it into a massive conglomerate, holding key shareholdings in businesses such as Korea Zinc.
When Korea Zinc was founded in 1974, the two families held equal shares in Young Poong. But Chang’s two sons ended up with a bigger share over time as they maintained most of their stake within the family. But Choi family’s stake was divided among his five sons and got diluted over time.
When Choi took over as the chairman of Korea Zinc in 2022, his big and expensive push into battery metals and renewable energy became the flash point between the families. Choi has said his new growth strategy was made to ensure sustainability of Korea Zinc, which depends heavily on carbon-intensive smelting business.
“It is neither possible nor appropriate for the third-generation founding family members to continue to co-manage the company when the shares have been fragmented and passed on,” Chang Hyung-chin, the late founder’s son, was cited as saying in the statement.
However, Korea Zinc opposed MBK’s move. Korea Zinc is led by Chairman Choi Yun-beom, the late founder’s grandson.
“Korea Zinc is against the tender offer by MBK, a predatory corporate raider and speculative capital,” it said in a statement calling the move a “hostile and predatory M&A.”
“We will have to see the outcome of the tender offer,” said Roh Jongwon, chief investment officer at Infinity Global Asset Management Co. “There are often the cases where white knights are hiding so it’s too early to say who has the upper hand.”
MBK is offering 660,000 won per share in the tender offer, 19% above Thursday’s close. The offer will be open between Sept. 13 and Oct. 4 and will cost MBK 2 trillion won, according to Bloomberg’s calculations. Korea Zinc’s shares settled at 666,600 won Friday.
The private equity firm signed the agreement with Young Poong and its founding family members, who collectively hold more than a 30% stake in Korea Zinc. The deal will grant MBK a call option to buy a portion of the shares held by Young Poong and its founding family, according to the Thursday statement from the private equity firm.
Founded in 2005, MBK has more than $30 billion in capital under management, according to its website. It will eventually hold one share more than the stock collectively held by Young Poong and its family members, it said. MBK said the deal will also allow the private equity firm to have the voting rights for Young Poong and the Chang family’s remaining stake.
The tender offer was earlier reported by Seoul Economic Daily.
--With assistance from Shinhye Kang.
(Updates company valuation in headline and first paragraph)
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