(Bloomberg) -- The battle for control of the world’s largest zinc smelter marks the beginning of the end of a multi-billion dollar succession feud as buyout firm MBK Partners says it has succeeded in securing a 5.34% stake in Korea Zinc Co.
The private equity firm completed the bidding process for the metals producer on Monday, according to a spokesman at MBK, which teamed up with Young Poong Corp. last month to launch a takeover bid.
Investors had until the end of Monday to decide whether to accept a twice-sweetened 830,000 won-per-share ($611) joint offer from the two companies, which will now collectively hold 38.47% in the zinc producer.
“We believe we have secured enough voting shares to get our views across during shareholders meetings” said MBK, which sought to purchase as much as 14.6% of the refiner’s shares.
Meanwhile, a buyback offer launched by Korea Zinc Chairman Choi Yun-Beom to fend off the unsolicited bid from the two companies will run until Oct. 23. Choi’s 890,000 won-a-piece gambit, supported by buyout firm Bain Capital, is just about 7% higher than that consortium’s price, valuing the company at 18.4 trillion won.
Korea Zinc said in an emailed statement that “we believe the subscription fell short of their target.”
The endgame here is expected to have ripple effects far beyond South Korea. The company controls about 12% of the refined zinc output outside of China, making it a key player in the efforts to diversify the supply of energy-transition metals. Zinc is used to galvanize steel and as a coating to prevent rust on solar panels and wind turbines, and the metal is also an alternative to lithium for batteries.
And while bitter public disputes among family-controlled conglomerates, or chaebols, are a recurring phenomenon in Korea and are the subject of popular TV dramas, few involve major private equity firms.
“MBK is going after these family-controlled companies that are exposed to the risk of management fight, which is keeping them on their toes,” said Park Ju-gun, head of corporate research firm Leaders Index in Seoul. “It’s a zero-sum game, but Choi is clearly more desperate because his defeat would mean the end of everything for him.”
At Loggerheads
The saga revolves around disagreements over the direction of the company and the role it can play in the global energy transition, which have left Korea Zinc’s Choi, the grandson of one of the founders, and Young Poong, controlled by the rival faction, at loggerheads.
A long-simmering dispute, the founding families’ fight spilled into the open last month with the MBK-backed bid. Timed right before the South Korean Thanksgiving holiday, it was intended to catch the Choi family by surprise. Retaliatory offers followed, pushing the stock to successive records.
South Korea’s financial watchdog intervened last week, calling the fight “overheated” and threatening to punish anyone engaging in unfair trade practices to influence the stock price.
MBK, founded by a US-educated former banker and Carlyle Group dealmaker, billionaire Michael ByungJu Kim, has said it wants to improve the corporate governance of Korea Zinc.
For over seven decades, the Chois and the Changs quietly built their holding company Young Poong into a massive conglomerate. But their differences grew when Choi, 49, became chairman in 2022, and announced plans to stake the company’s future on green transition.
Choi wants to diversify Korea Zinc away from its decades-old non-ferrous metals refining business, by investing in the green economy, while the rival faction is keen for it to maintain strong dividends. To fulfill his goal, Choi struck a series of agreements with South Korean conglomerates, including Hyundai Motor Group, units of Hanwha Group, LG Chem Ltd, and commodities trader Trafigura Group, issuing new shares and raising funds.
The Chang family saw Choi’s attempt as a way to increase his influence by bringing in “friendly” investors and roped in MBK.
Korea Zinc shares slipped 0.1% to settle at 793,000 won on Monday, about 11% below Choi’s buyback price. MBK’s announcement came after the market closed.
--With assistance from Youkyung Lee, Atul Prakash and Nicholas Larkin.
(Updates throughout with the offer result and comments from companies.)
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