Big differences: Choi (second right) speaks during a news conference in Seoul. For over seven decades, the Chois and the Changs quietly built their holding company Young Poong into a massive conglomerate, and today they are at loggerheads. — Bloomberg
SEOUL: The battle for control of the world’s largest zinc smelter faces a critical deadline that could mark the beginning of the end of a multi-billion-dollar succession feud.
Korea Zinc Co investors have to decide whether to accept a twice-sweetened 830,000 won-per-share takeover offer from a consortium made up of its biggest shareholder, Young Poong Corp, and MBK Partners, one of North Asia’s biggest private equity firms.
The two said last week there would be no further price increases.
On paper, that leaves an alternative offer ahead – a buyback launched by chairman Choi Yun-Beom to fend off the unsolicited bid.
Korea Zinc’s 890,000 won-a-piece gambit, supported by buyout firm Bain Capital, is just over 7% higher, valuing the company at 18.4 trillion won (US$13.6bil).
Yet the stock has traded well short of that level, indicating continued scepticism among investors.
The endgame here will have ripple effects far beyond South Korea.
The company controls about 12% of the refined zinc output outside of China, making it a key player in the efforts to diversify the supply of energy-transition metals.
Zinc is used to galvanize steel and as a coating to prevent rust on solar panels and wind turbines, and the metal is also an alternative to lithium for batteries.
And while bitter public disputes among family-controlled conglomerates are a recurring phenomenon in South Korea and are the subject of popular TV dramas, few involve major private equity firms.
“MBK is going after these family-controlled companies that are exposed to the risk of management fight, which is keeping them on their toes,” said Park Ju-gun, head of corporate research firm Leaders Index in Seoul.
“It’s a zero-sum game, but Choi is clearly more desperate because his defeat would mean the end of everything for him.”
The saga revolves around disagreements over the direction of the company and the role it can play in the global energy transition, which have left Korea Zinc’s Choi, the grandson of one of the founders, and Young Poong, controlled by the rival faction, at loggerheads.
A long-simmering dispute, the founding families’ fight spilled into the open last month with the MBK-backed bid.
Timed right before the South Korean Thanksgiving holiday, it was intended to catch the Choi family by surprise.
Retaliatory offers followed, pushing the stock to successive records.
The South Korean financial watchdog, the Financial Supervisory Service, intervened last week, calling the fight “overheated” and threatened to punish anyone engaging in unfair trade practices to influence the stock price.
MBK, founded by a US-educated former banker and Carlyle Group dealmaker, billionaire Michael ByungJu Kim, said it wants to improve the corporate governance of Korea Zinc. — Bloomberg
