(Bloomberg) -- MBK Partners sweetened its unsolicited bid for control of Korea Zinc Co. by about 14%, pushing the stock to a record and valuing the world’s biggest zinc smelter at 15.5 trillion won ($11.6 billion).
The private equity fund is now offering 750,000 won per share, compared with the previous offer of 660,000 won each, it said in a statement Thursday.
“If existing investors participate in the subscription, it is expected to be a golden opportunity to realize sufficient trading profits,” the buyout firm said in the statement.
The battle for control of Korea Zinc, founded more than 50 years ago by two families, has intensified after MBK teamed up with Korea Zinc’s biggest shareholder Young Poong Corp. to launch a surprise offer this month. MBK, one of North Asia’s biggest buyout shops with $30 billion assets under management, has vowed to improve Korea Zinc’s corporate governance and its deteriorating finances.
But Korea Zinc has rejected MBK and Young Poong’s move and described it as “hostile and predatory M&A.” It also warned of supply disruptions for South Korea’s key industries like semiconductor if MBK takes over.
What started as differences over Korea Zinc’s strategic direction under Chairman Choi Yun-beom has erupted into a full blow and bitter battle for control, one that risks becoming a distraction for a company that controls around 5% of the world’s refined zinc output.
Some of Korea Zinc’s minority shareholders, including commodities trader Trafigura Group, Hanwha Corp. and LG Chem Ltd. have raised concerns that MBK’s bid could undermine some of the strategic partnerships they have struck in recent years. But the minority shareholders have declined to say whether they would join a bidding war as speculated by the local media.
Korea Zinc’s shares rose as much as 6.1% during early hours of trading, after settling at 704,000 won on Wednesday. Shares rallied to a record high last week on speculation of a higher bid and the possibility of Korea Zinc tapping rival bidders to counter the buyout firm.
In a rare, aggressive move, Young Poong took out advertisements in Thursday’s print editions of morning newspapers including Maeil Business Newspaper and the Chosun Ilbo newspaper, outlining the merits of its plans. Separately, Young Poong said it will hold a press briefing in Seoul Friday.
MBK’s offer expires on Oct. 4 and will cost the private equity firm about 2.3 trillion won, according to Bloomberg’s calculations. Korea Zinc officials have said they are considering their response.
“Now, Choi is under pressure — he’s got just five trading days left, until the 4th of next month, to counter with a competing tender offer or some other move,” Sanghyun Park, an analyst at Clepsydra Capital, who publishes on the platform Smartkarma, wrote in a report. “MBK’s clearly aware of this whole situation, which is why they’re making a calculated bet.”
Tensions over the 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.
--With assistance from Sangmi Cha.
(Updates with an analyst comment in penultimate paragraph.)
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