(Bloomberg) -- A buyback of Korea Zinc Co. shares orchestrated by Chairman Choi Yun-beom in an effort to defend the world’s biggest producer of the refined metal from a takeover bid has brought in a total of more than 11% of the company’s stock, but failed to resolve a bitter battle for control.
The vast majority of the paper, held as treasury stock and likely to be canceled, does not come with voting rights. Bain Capital, which has backed Choi, secured 1.4%.
Choi, scion of one of two founding families, has for months been fending off an approach from Young Poong Corp., the company’s biggest shareholder, owned by the descendants of the second founder, and private equity firm MBK Partners. He announced the plan to repurchase shares earlier this month, beating Young Poong’s twice-sweetened 830,000 won-per-share offer with a 890,000 won alternative.
Korea Zinc had sought to repurchase as much as 20% of the company.
Swirling speculation around the company’s future has pushed the zinc smelter’s stock through repeated records. Having surged more than 50% last week, it rose as much as 7.5% after the buyback results were announced. Shares were trading at around 1,328,000 won ($958) as of 12:27 p.m. Seoul time, having pared some of those gains.
“Investors who did not participate in Korea Zinc’s buyback appear to believe that this will continue for a while, and that they can get an even bigger profit if they wait,” said Cho Junkee, a market analyst at SK Securities Co. “The gap didn’t narrow as much as expected, so the battle will go on.”
Before the buyback, Choi had the support of about 34% of shareholders. Young Poong and MBK, meanwhile, control around 38% of the company after their offer that expired earlier this month. Thanks to Bain, that now rises to just over 35%.
If the newly repurchased shares are retired, both sides will see their holding nudge higher. Sanghyun Park, analyst at Clepsydra Capital in Seoul who publishes on SmartKarma, estimated the Choi camp would lift its holding to 39.5%, while MBK would rise to 42.1%. Minority shareholders will hold 15.8%.
MBK, which has criticized the buyback as a step that largely adds to Korea Zinc’s financial strain, could now seek to add friendly board members. It said in a statement on Monday that the Young Poong side would convene an extraordinary general meeting to lay out improvement proposals. “The foundation has been laid for us to improve corporate governance.”
--With assistance from Shinhye Kang.
(Writes through, adds analyst comment in fifth paragraph.)
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