A bitter battle has damaged out for management of the world’s greatest zinc smelter, pitting South Korea’s main non-public fairness agency in opposition to an array of big-name industrial teams.
The battle over Korea Zinc is being intently watched within the mining sector due to considerations it might delay the smelter’s annual zinc provide contract negotiations, which function a worldwide benchmark. Korea Zinc is a detailed companion to massive sources teams equivalent to Teck Sources and Trafigura.
Michael ByungJu Kim, referred to as the “godfather of Asian non-public fairness”, is main a takeover bid geared toward Korea Zinc’s chair Choi Yun-beom, a scion of one of many firm’s two founding households.
Kim’s agency, Seoul-based MBK Companions, accuses Choi of overseeing a deterioration within the profitability of Korea Zinc, which has a market capitalisation of $11bn, since he took the helm in 2019.
However the administration of Korea Zinc, which has the world’s biggest zinc smelter by annual output and in addition produces battery supplies wanted for western efforts to construct a non-Chinese language electrical automobile provide chain, say it’s being subjected to a hostile takeover bid led by foreign-backed “company raiders” intent on promoting the corporate off to China.
“For the sake of our nation, our individuals and our shareholders we’ve got to forestall our know-how from being offered to China,” Korea Zinc’s vice chair Lee Je-jung informed reporters final week.
Park Yoo-kyung, head of rising market equities at APG Asset Administration, mentioned Korea Zinc’s administration was participating in “soiled public propaganda, utilizing Koreans’ worry of business competitors from China”.
MBK has publicly dedicated to not promote the corporate to a Chinese language bidder or to any purchaser not acceptable to the Korean authorities.
Korea Zinc and its mother or father firm, Younger Poong Group, have been co-founded by the respective patriarchs of the Choi and Jang households — each refugees from North Korea. Underneath an off-the-cuff settlement reached between the 2 co-founders, Korea Zinc could be managed by the Choi household and Younger Poong and its associates by the Jang household.
Final month, nonetheless, MBK introduced that the Jang household had handed over stewardship of its 33.1 per cent stake in Korea Zinc to the non-public fairness fund and that collectively they’d make a young supply for sufficient shares to safe near a 50 per cent stake.
Jeonghwan Kim, a companion at MBK, mentioned the Jang household had approached the fund because of their considerations over Choi’s management. He famous that Choi and his prolonged household solely personal 15.6 per cent of Korea Zinc.
Kim informed the Monetary Instances that Choi was answerable for “poor company governance” on the firm, singling out a multimillion-dollar funding made with out board approval into funds operated by a detailed college pal of Choi’s, at the moment standing trial on inventory manipulation prices.
Korea Zinc argued that the funds, which have been invested in a Ok-drama studio and a Ok-pop label amongst different companies, have been reputable investments that didn’t require board approval.
A number of strategic traders in Korea Zinc informed the FT they’d considerations about how the takeover battle — and potential subsequent non-public fairness involvement — would have an effect on the corporate, a significant world producer of refined zinc, lead and silver. Shareholders embody associates of South Korean conglomerates LG, Hanwha, and Hyundai, in addition to Swiss buying and selling home Trafigura.
“As enterprise co-operation with Korea Zinc requires long-term funding, there may be concern that the success and continuity of the enterprise co-operation could also be jeopardised if the administration management dispute is extended because of [MBK’s] tender supply,” Hanwha mentioned.
One shareholder additionally expressed concern about future funding in a nickel smelter that Korea Zinc is constructing within the south-eastern metropolis of Ulsan. When accomplished, the smelter, during which Trafigura is an investor, could be a key supply of nickel that meets US guidelines on sourcing for battery supplies.
Trafigura mentioned Korea Zinc’s determination to diversify into battery metals “was a well-thought-out transfer to increase its portfolio”.
The buying and selling group, which holds a 1.5 per cent stake in Korea Zinc, praised the administration crew in a press release, including: “As shareholders, we’re monitoring any company actions which will disrupt the corporate’s operations or future prospects.”
Park Ki-deok, president and co-chief govt of Korea Zinc, informed the FT that it was rallying traders together with Trafigura behind the administration. The deadline for MBK and the Jang household’s joint tender supply is on Friday.
“We’re making ready for a counter tender supply and have secured sufficient funding for this,” mentioned Park, including that he was additionally in search of backing from native and international non-public fairness teams.
Nonetheless Namuh Rhee, chair of the Korean Company Governance Discussion board, mentioned fears of disruption have been overblown, arguing that it could be higher for Korea Zinc to be run by skilled managers appointed by MBK than by an “unproven” third-generation inheritor equivalent to Choi.
“MBK is a high-quality non-public fairness fund with most of its funds from pension endowments, so it is not going to seemingly pursue short-term good points from Korea Zinc,” mentioned Rhee.
The saga unfolds at a time when zinc smelters all over the world are struggling to get sufficient enter materials because of decrease mined provide of zinc focus.
Korea Zinc usually negotiates an annual contract in January or February with its main provider Teck Sources over zinc processing charges, which acts as an off-the-cuff world benchmark for the remainder of the trade.
If the prevailing administration is distracted by the takeover battle, it “could delay the primary spherical of data sharing within the annual zinc therapy cost negotiation,” mentioned Colin Hamilton, commodities analyst at BMO Capital Markets.
Final week, MBK introduced it was growing its tender supply from Won660,000 to Won750,000 ($568) per share. Korea Zinc’s share value, up nearly 25 per cent since an preliminary tender supply was introduced, stood at Won688,000 on the finish of buying and selling on Monday.
