Korea Zinc teams up with brokerage firm to counter MBK

Korea Zinc Inc. Chair Choi Yun-birm has joined hands with a major local securities firm in a counterattack against MBK Partners Ltd. and the company’s top shareholder Young Poong Group in a battle for control of the company.

Korea Investment & Securities Co., which has a 0.8% stake in the smelter, is set to raise some 2 trillion won ($1.5 billion) with private equity firms at home and abroad for their own tender offer, according to investment banking industry sources on Thursday.

The brokerage house’s officials met with officials of the private equity firms to discuss creating a consortium to help Choi maintain management control by injecting the lion's share through its principal investment and asking those investors to take care of the rest, the sources said.

Korea Investment & Securities is seen as Choi’s ally as the Korea Zinc chair is reportedly close to Kim Namgoo, CEO and chairman of the securities firm’s parent Korea Investment Holdings Co.

“I am confident of a victory in this fight thanks to the help and encouragement of many grateful people,” Choi said.

The news pushed Korea Zinc’s shares to a record high of 720,000 won in the country’s main stock market on Thursday, boosting expectations that the feud over its management control will intensify further. The stock ended up 6.15% at 707,000 won on the day, far outperforming the benchmark Kospi's 0.21% gain.

Last week, MBK, the North Asia-focused private equity firm, unveiled a plan to take over Korea Zinc through an up to 2 trillion won tender offer in partnership with its largest shareholder Young Poong Group.

ALLY WITH DEEP POCKETS

MBK and Young Poong Corp., the group’s controlling company, plan to buy at least a 7.0% stake in Korea Zinc to secure a 44% stake with voting rights and control the smelter.

Choi and his allies including Hyundai Motor Group, Hanwha Corp. and LG Chem were estimated to hold a 33.99% stake in total.

The Seoul-based private equity firm’s plan may be thwarted as Korea Investment & Securities joins the fight with its strong fundraising power, industry sources said.

The brokerage house raised 3 trillion won without borrowings when it teamed up with South Korea’s leading seafood and logistics conglomerate Dongwon Group to acquire HMM Co., the country’s top container ship operator.

Choi has broken off affiliate relationships with Young Poong Group and its owner’s family members to make a counter tender offer. Those relationships had prohibited him from buying stakes in the stock market and launching a counter tender offer, according to South Korea’s Capital Markets Act.

Young Poong Group was founded by Chang Byung-hee and Choi Ki-ho in 1949. The group’s two major affiliates have largely been run by their descendants. The Chang family controls Young Poong Corp. and the electronics parts units, while the Choi family manages Korea Zinc and the non-electronics units.

Their conflicts heated up as Korea Zinc, the conglomerate’s cash cow, issued new shares to Hyundai Motor Group and swapped treasury stocks with Hanwha and LG Chem.

The smelter accelerated its efforts to terminate its decades-long business relations with Young Poong Group by dominating the boardroom of group affiliate Sorin Corp in June.

Write to Jun-Ho Cha, Jong-Kwan Park and Hyeon-woo Oh at chacha@hankyung.com
 
Jongwoo Cheon edited this article.