Korea Zinc to fulfill share buyback regardless of offer size

Korea Zinc Inc. will buy back all the shares unloaded by its shareholders in a tender offer worth up to 3.1 trillion won ($2.4 billion) regardless of the size of their offers, the company said on Friday. The decision is seen aimed at reducing uncertainty over its buyback plan to defend against MBK Partners’ attempt to take control of the company.

On Friday, the world's No. 1 lead and Zinc smelter kicked off its share buyback with the backing of Bain Capital, a US private equity firm. It will pay 830,000 won per share, 10.7% higher than an MBK-led consortium’s bid price of 750,000 won.

Korea Zinc and Bain Capital aim to buy up 18% of its outstanding shares combined until Oct. 23. Early this week, Korea Zinc had said that if its tender offer fails to attract shares amounting to 5.87% of its floating stock, it would abandon the buyback plan.

But the company removed the minimum buyback conditions, according to its regulatory filing on Friday, which may raise the chances of Korea Zinc winning the battle against the MBK-Young Poong Corp.'s consortium.  

The company will retire all the shares it is buying back.

The MBK-led group has offered to purchase at least 6.98% of the lead smelter's floating stock, a minimum amount to secure the latter's management rights. Its three-week tender offer expires on Friday.

Investors cheered Korea Zinc’s Friday announcement, pushing its shares to a record high of 774,000 won at one point on Friday morning, above the MBK-Young Poong Corp’s bid price of 750,000 won.

On Wednesday, investors showed a lukewarm response to Korea Zinc’s buyback plan. They doubted about its financing capability, considering it is funding the buyback with borrowings and bond issues, which is estimated to cost at least 100 billion won for interest payments, according to industry banking sources.

The same day, its shares closed 3% higher at 713,000 won, below MBK-led group’s bid price of 750,000 won. The Korean stock market was closed on Thursday for a public holiday.

Young Poong, a non-ferrous metal smelter, is Korea Zinc's largest shareholder with a 25.4% stake.

Write to Jong-Kwan Park, Ji-Eun Ha and Hyung-Kyu Kim at pjk@hankyung.com
 

Yeonhee Kim edited this article