Korea Zinc Fights Back: $1.5 Billion Share Buyback to Thwart Takeover

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Yun B. Choi, Chairman of Korea Zinc’s board speaks during a press conference in Seoul, South Korea, October 4, 2024. Yonhap via

Strategic Move Amidst Hostile Takeover Attempts

Korea Zinc has announced a bold strategy to fend off a potential takeover by launching a $1.5 billion share buyback. This move aims to secure its position against its largest investor, Young Poong, and private equity firm MBK, who are attempting to acquire a larger stake in the company.

Share Buyback Details

On Monday, Korea Zinc revealed it had successfully bought back 9.85% of its shares. This significant investment comes as the company seeks to deter shareholders from selling their stakes to Young Poong and MBK. In a separate development, Bain Capital, a supporter of Korea Zinc’s current leadership, also acquired a 1.41% stake in the company, according to a recent regulatory filing.

Control Struggle

Korea Zinc, the world’s largest zinc smelter, has been embroiled in a contentious battle for control between the Choi family, who currently run the company, and the Chang family, co-founders of Young Poong. This power struggle escalated when Young Poong and MBK made a joint offer for control back in September.

Shareholder Dynamics

Despite the significant buyback, analysts suggest that the total support for Korea Zinc’s management remains lower than the combined stake held by MBK and Young Poong, which currently stands at approximately 38.5%. Before the buyback, the Choi family had backing from shareholders owning about 36% of the company, including key partners like Hyundai Motor Group.

Impact on Share Prices

Following the buyback announcement, Korea Zinc’s shares surged by as much as 11.7% on Monday, reaching 1.4 million won, which is 57% higher than the buyback price of 890,000 won. The trading session ended with shares up 3.8%, marking a record closing price. The reduced number of shares available due to tender offers has contributed to this price increase.

Future Considerations

Korea Exchange has issued a warning regarding the rapid rise in share prices, indicating that trading may be halted if these trends continue. Meanwhile, shares of Young Poong also saw an increase, closing up 7.45%.

In a related move, MBK has nominated 14 new directors to the board of Korea Zinc, which currently has 13 members. They have also called for an extraordinary shareholder meeting, further intensifying the ongoing battle for control.

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