Korea Zinc Withdraws $1.8 Billion Share Issuance Plan

By Jack Kim and Hyunjoo Jin
Seoul (Reuters) – Korea Zinc announced on Wednesday it will withdraw its proposal to issue new shares worth $1.8 billion. This decision came after the proposal prompted an investigation from the financial watchdog and led to a significant drop in the company’s stock value.

As the world’s largest zinc refiner, Korea Zinc is preparing for a confrontation with Young Poong and private equity firm MBK Partners at an upcoming shareholder meeting, amid an ongoing takeover conflict involving family members of Korea Zinc’s founding family.

In a statement, Korea Zinc acknowledged, "We have decided to humbly accept concerns from the market and shareholders." The company also expressed confidence about presenting its long-term vision at the shareholder meeting.

The decision to withdraw the share sale represents a setback for Korea Zinc Chairman Yun B. Choi, who previously supported the share issuance as a strategy against the takeover attempts by Young Poong and MBK, who have increased their ownership to nearly 40%, overtaking Choi's group which holds about 35%.

In its regulatory filing, Korea Zinc attributed the withdrawal to market concerns and regulatory scrutiny. Initially, shares rose 6% following the announcement but later declined by 7% in afternoon trading.

On October 30, Korea Zinc had announced a plan to issue new shares equivalent to nearly 20% of its total shares, shortly after a stock buyback at a higher price.

The South Korean financial market watchdog has initiated an investigation into whether the decision to issue new shares involved any unfair practices. The Financial Supervisory Service (FSS) also intervened by requiring Korea Zinc to amend its stock exchange filing concerning the share issuance.

MBK Partners and Young Poong criticized the tardiness of Korea Zinc's decision, stating in a joint statement, "As the biggest shareholders of Korea Zinc, it is regrettable that Korea Zinc belatedly withdrew the plan only after causing major confusion in the capital market, inflicting damage on existing shareholders."

BOARD BATTLE

Young Poong and MBK Partners have requested a court to permit a special shareholder meeting, expected early next year. They plan to nominate 14 new directors for the firm, which currently has 13 board members, aiming to secure a majority.

Choi is also likely to propose new independent directors to attract investors, including the National Pension Service, which owns over 5% of the company, noted Park Ju-gun, head of corporate analysis at Leaders Index.

Korea Zinc stated it will "actively push for" enhancing board independence and governance, though did not provide further details. Choi, a grandson of the company's co-founder and a Columbia Law School alumnus, is scheduled to hold a news conference later today.