Korea Zinc shares surge to record high after court clears hurdle for buyback offer (updated)

YoungPoong

21/10/2024 07:50

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      Korea Zinc shares close 6.4% higher
    

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      Young Poong says it will file lawsuit after injunction
rejected
    

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      Company's largest shareholder argued buyback violates
fiduciary
duties
    

  
 (Add details about court decision on injunction)
    By Hyunjoo Jin
       SEOUL, Oct 21 (Reuters) - A South Korean court on Monday
rejected a request by Young Poong to temporarily block Korea
Zinc  010130.KS  from proceeding with its tender offer to buy
back shares in the company, pushing shares in the world's
biggest zinc refiner to a record high.
    After the court denied the injunction, Korea Zinc's biggest
shareholder Young Poong  036560.KQ  said it would file a
lawsuit, signalling a lengthy legal battle between founding
families over control of the metals giant. 
    Young Poong has joined with private equity fund MBK Partners
in an attempt to acquire a controlling stake in the refiner.
That prompted Korea Zinc to partner with Bain Capital to propose
to buy back shares in a $2.6 billion tender offer aimed at
fending off the move.  
    Young Poong had argued to the court that Korea Zinc Chairman
Yun B. Choi and two other executives violated fiduciary duties
and breached trust through the plan to buy back treasury shares
at prices above market value, in a move that would saddle the
company with debt but bolster Choi's control.
    The court ruling said the documents Young Poong had
submitted so far did not show enough for it to determine Korea
Zinc executives violated their fiduciary duty.
    Korea Zinc's debt-to-equity ratio is expected to more than
quadruple to 80%-100% after the tender offer, but the court said
the ratio was not considered to be higher than many listed
companies. The court also said it was hard to calculate the
value of Korea Zinc shares, which have risen by more than 50%
since MBK launched a tender offer in September. 
    The court said it could not conclude the buyback amounted to
breach of trust because Korea Zinc pledged to cancel the
treasury shares it acquires under the tender. The court also
said there were no legal restrictions on repurchasing treasury
shares to solidify management control in South Korea. 
    MBK said it was disappointed by the court decision and
raised concerns it would have a negative impact not only on
Korea Zinc's financial health, but the country's corporate
governance and capital markets.  
    Korea Zinc shares closed up 6.4% at a record high of 877,000
won, close to the company's tender offer price of 890,000 won. 
    MBK said it would provide an update on its plan for an
extraordinary shareholder meeting after Korea Zinc's tender
offer expires on Wednesday. 
    MBK and Young Poong have secured a more than 5% stake in
Korea Zinc through their tender offer of 830,000 won per share,
paving the way for a battle for boardroom control at an upcoming
shareholder meeting.  
    ($1 = 1,367.7700 won)

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EXPLAINER-Family feud over Korea's zinc giant threatens to
affect supply chain     urn:newsml:reuters.com:*:nL4N3LG089
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 (Reporting by Hyunjoo Jin; Additional reporting by Hyonhee Shin
and Jihoon Lee; Editing by Ed Davies and Jamie Freed)