The battle for control of Korea Zinc Inc. between an MBK Partners-led alliance and the zinc smelter’s Chairman Choi Yun-birm is turning into a never-ending saga after a Seoul district court partially sided with MBK, while rejecting a key decision by Chairman Choi.
On Friday, the Seoul Central District Court ruled in favor of the MBK-Young Poong Corp. consortium that sought to block Choi’s move to weaken the alliance’s voting rights by creating a circular ownership structure.
If the district court had rejected the MBK’s request, the MBK-Young Poong alliance’s voting stake would have shrunk to about half the size of Chairman Choi and his allies’ combined holdings.
The court decision, however, did not represent a complete victory for either side.
It turned down MBK’s demand to invalidate cumulative voting that won a majority support at Korea Zinc’s January extraordinary shareholder meeting in January.
Choi pushed ahead with the adoption of new voting system to fight against the MBK-led group, which has secured about half of the zinc smelter. Cumulative voting allows Choi to appoint at least one board director on his side.
Of the 13 members on Korea Zinc’s board, 12 was appointed by Choi.
Following the court verdict, the two sides’ battle over control of the world’s No. 1 lead and zinc smelter is expected to intensify. They will likely face off in a proxy fight at a general meeting of shareholders later this month.
Just a before the January extraordinary shareholder meeting, Choi transferred his 10.3% stake to SMC, a unit of Korea Zinc’s subsidiary, creating a circular shareholding structure with Young Poong — the largest shareholder of Korea Zinc — at the top of the ownership chain.
Under the South Korean Commercial Law, voting rights are restricted for companies involved in circular shareholding structures. Based on this rule, Korea Zinc’s management tried to restrict the voting rights of Young Poong’s 25.4% stake in Korea Zinc.
Without the backing from Young Poong, MBK with a 15.57% stake in Korea Zinc, would be unable to block Korea Zinc’s appointment of new board directors on its side.
Giving a sigh of relief to MBK, the Seoul district court said the move was in violation of the country’s commercial law.
The court ruling deals a blow to MBK Partners, which filed for court protection for its wholly owned unit Homeplus Co., South Korea’s second-largest hypermarket chain, earlier this week. The largest buyout firm in North Asia has yet to exit from Homeplus under cumulative losses.
Its fight over Korea Zinc could take more than five years to reach a Supreme Court ruling, putting pressure on MBK to meet redemption requests from its limited partners.
In 2024, operating profit at Korea Zinc. leapt 11.5% to 736.1 billion won ($510 millio) from the previous year, with sales up 24.5% to 12.08 trillion won thanks to metal price rises.
However, net profit plummeted 59.6% on-year to 215.5 billion won, which the company blamed on foreign exchange-related losses.
By Jin-Won Kim and Sang Hoon Sung
Jin1@hankyung.com
Yeonhee Kim edited this article.
