South Korea’s Ministry of Trade, Industry and Energy has designated Korea Zinc’s high-nickel precursor manufacturing technology—a key component for battery cathodes—as a national core technology under the Act on Prevention of Divulgence and Protection of Industrial Technology. The designation, announced by Korea Zinc on Nov. 18, highlights the strategic importance of the technology, which boosts energy density in advanced batteries and positions Korean battery makers ahead of their Chinese competitors.
The designation requires government approval for any overseas sale, posing a significant challenge to private equity firm MBK Partners, which is attempting to acquire Korea Zinc. MBK, known for its strategy of reselling acquired companies, may face hurdles in securing buyers for Korea Zinc under the new restrictions.
Precursors are compounds made by blending nickel, cobalt, and manganese, with the high-nickel variety containing over 80% nickel content. They are critical for the production of high-performance batteries, a field where Korea aims to maintain an edge over global competitors. With over 90% of precursors currently imported from China, Korea Zinc’s initiative to locally mass-produce high-nickel precursors has been deemed vital to national economic and security interests.
MBK had applied to acquire Korea Zinc, but the designation complicates potential exit strategies. Investors and analysts note that restrictions on selling entities with national core technology make it difficult for MBK to recoup investments within typical timeframes. Historical precedents, such as the failed sale of Doosan Machine Tools in 2016 and Taihan Cable & Solution in 2020, underscore the challenges posed by the designation.
Critics, including Korea Zinc’s labor union, had voiced concerns that MBK might resell the company to foreign entities, particularly Chinese investors, a claim MBK has denied. The firm previously stated its intent to manage Korea Zinc as a long-term investment. However, past controversies, such as MBK’s early sale of ING Life Insurance despite assurances of long-term commitment, have fueled skepticism.
Industry insiders anticipate that MBK will struggle to find domestic buyers willing to pay the estimated 8 trillion won ($6 billion) value of its Korea Zinc stake. Analysts suggest the firm may explore alternative strategies, such as divesting non-core businesses or focusing on dividend income.
One possibility is splitting off Korea Zinc’s precursor technology into a separate entity while selling its core zinc smelting operations. Such a move would preserve the technology under South Korean ownership while allowing MBK to capitalize on other business units.
Korea Zinc welcomed the designation, stating, “The recognition affirms the national security and economic significance of our technology.” MBK also expressed support, adding, “We are committed to ensuring that Korea Zinc’s core technologies remain safeguarded and to fostering the company’s sustainable growth.”
