MBK, Young Poong to call for Korea Zinc shareholder meeting in push to revamp board

YoungPoong

25/10/2024 24:40

* 
      Korea Zinc, Young Poong want their representatives to
account
for more than half the board
    

        * 
      Korea Zinc board currently has 13 members led by Chairman
Yun B.
Choi
    

        * 
      MBK says it wants to separate management from board to
tackle
corporate governance issues at Korea Zinc
    

  
    By Hyunjoo Jin
       SEOUL, Oct 25 (Reuters) - Korea Zinc's top shareholder
Young Poong and private equity fund MBK Partners plan to call
for an extraordinary shareholder meeting this year seeking
approval to appoint their board nominees, a top executive at the
fund said, escalating a takeover battle. 
    Run by the Choi family, Korea Zinc  010130.KS  has been in a
bitter fight for control of the $17 billion zinc empire with the
co-founding Chang family, whose conglomerate Young Poong
 000670.KS  made an initial joint offer with MBK in September.  
 
    MBK and Young Poong want their representatives to account
for more than half the board of the world's biggest zinc
refiner, Kim Kwang-il, a partner at MBK, told Reuters in an
interview, adding they have yet to decide on the number of new
directors. 
    Currently, Chang Hyung-jin, a Young Poong adviser, is the
only member representing Young Poong in the 13-member board.
    MBK will also propose the introduction of an "executive
officer" system, to separate management from the board, a
measure that would require Korea Zinc Chairman Yun B. Choi to
give up his management role, Kim said. 
    "Korea Zinc is a typical example of board of directors not
taking into account shareholders' interests in South Korea," Kim
said. "To them, the company is synonymous with Choi. That is the
corporate governance problem that we want to resolve."    
    MBK and Young Poong acquired a more than 5% stake in the
South Korean firm through a tender offer that closed last week,
bringing their combined stake in the firm to nearly 39%. 
    To counter the proposal, Korea Zinc launched a share buyback
programme that closed on Wednesday. It has yet to disclose how
many shares were tendered. 
    Korea Zinc's Choi family can potentially secure the backing
of up to 36.5% of shareholders, including Bain Capital and
strategic partners such as Hyundai Motor Group, according to
analysts. 
    
    CORPORATE GOVERNANCE
    Korea Zinc has been criticised by some governance experts
for its $400 million investment in private equity funds run by a
longtime friend of Choi who has been detained and released on
bail over his company's alleged involvement in a stock
manipulation scheme involving K-pop agency SM Entertainment
 041510.KQ . 
    "This is a conflict of interest," Kim said, adding the
investments did not get board approval and Korea Zinc's shares
had been undervalued partly because of its inefficient capital
management.
        At a press conference this month, Choi said Korea Zinc
took all necessary steps required by the law and internal rules
to make a "reasonable and normal" management decision to use
surplus money to boost investment returns.
        Korea Zinc CEO Park Ki-deok, also told reporters on
Tuesday that its board composition and governance structure is
"exemplary", with independent directors making up the majority.
    MBK and Young Poong have far more than the 3% stake needed
to call for a special shareholder meeting. If the request is
rejected by Korea Zinc's board, MBK plans to seek a court
approval to press ahead and the proposed meeting could be
delayed to January or February, Kim said.  
    Adding new directors would require approval by a majority of
voting shareholders.
    The change of the board structure to separate management
roles requires approval from two-thirds of the votes present,
meaning that MBK and Young Poong would need to get support from
other shareholders such as the National Pension Service, which
has a 7.83% stake. 
    Shares in Korea Zinc skyrocketed 30% on Thursday to a record
high, as investors are bracing for a lengthy takeover battle for
the company that could involve on-market purchases by the rival
parties.
($1 = 1,380.5500 won)

 (Reporting by Hyunjoo Jin; Additional reporting by Cynthia Kim
in Seoul and Kane Wu in Hong Kong; Editing by Miyoung Kim and
Jamie Freed)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))