Korea Zinc’s upcoming extraordinary shareholders’ meeting will set the stage to test the management capabilities between the company’s current leadership, led by Chairman Choi Yun-beom, and the Young Poong-MBK alliance. Young Poong, Korea Zinc’s largest shareholder, teamed up with private equity firm MBK Partners to launch a tender offer for the company four months ago.
In a recent letter to shareholders, Chairman Choi and his team urged support, claiming that maintaining stability in core smelting operations and advancing new business investments are critical for long-term competitiveness. Korea Zinc, South Korea’s leading non-ferrous metal smelter, is one of the world’s leading refined zinc producers alongside Nyrstar, Hindustan Zinc, and Boliden.
Korea Zinc has identified renewable energy, EV battery materials, and the circular economy as the three pillars of its “Troika Drive” growth strategy. The company outlined a 10-year management plan at its 2023 Investor Day, aiming to increase sales by 2.5 times and boost its valuation to 70 trillion won ($50 billion) by 2033.
“The shareholder meeting will determine which management team has a proven track record and a genuine alignment with shareholder interests,” said a Korea Zinc official.
In terms of financial performance, Korea Zinc has a clear advantage. The smelter has recorded profits for 99 consecutive quarters since 2004, achieving an average annual operating margin of 12.8% over the past decade. The company plans to expand its new business portfolio by increasing the share of new ventures while maintaining margins above 12%.
In contrast, Young Poong has posted an average operating margin of -1% over the past decade. The company posted an operating loss of 169.8 billion won in 2023 and accumulated losses of 61 billion won through the third quarter of last year. The road to recovery remains challenging as the Seokpo Smelter shut down earlier this year due to unauthorized wastewater discharge.
The Young Poong-MBK alliance, which seeks to remove current leadership, has promised governance reforms and enhanced shareholder value but has not presented concrete business plans or goals. Instead, they argued that Korea Zinc’s management had eroded corporate value through poor investment decisions.
“If the 1.2 trillion won invested in One Asia Partners, Igneo Holdings, and Jugseok Enterprise had been allocated efficiently to more lucrative opportunities, Korea Zinc’s shareholder value could have risen by an estimated 2.5 trillion won,” MBK Partners Vice Chairman Kim Kwang-il said at a press conference last year.
MBK Partners has experience managing global firms as a general partner (GP) for institutional funds. Its management of home appliances maker Coway, which was sold back to Woongjin Group in 2018, is cited as a successful turnaround. MBK boosted Coway’s profitability through aggressive restructuring and cost-cutting measures, eventually selling the company for a profit of 1 trillion won after five years and seven months.
However, MBK’s management practices have also drawn controversy. Homeplus, acquired in 2015 for 7 trillion won, has struggled under MBK’s ownership. Before the acquisition, Homeplus generated annual operating profits of 200 billion won, but by 2023, the retailer posted an operating loss of 199.4 billion won, marking three consecutive years of losses. The company has faced backlash for layoffs and store closures, which have fueled conflicts with labor unions.
MBK has stated it will not seek a short-term exit if it gains control of Korea Zinc, but it has not specified how long it intends to maintain its investment. On average, MBK holds investments for 5.6 years before exiting. Young Poong cannot sell its Korea Zinc shares to third parties for 10 years under its agreement with MBK, but MBK has not clearly outlined any restrictions on share disposals, raising concerns that it could sell its stakes at any time.
Korea Zinc’s high-nickel precursor technology has been designated national core technology. While this classification lowers the possibility that the smelter will be sold to a foreign entity, fears remain about potential technology leaks to countries like China. MBK has assured that no such leaks will happen, but Korea Zinc has raised concerns about possible asset spin-offs, subsidiary sales, or technology sharing as a means for MBK to recoup its investment.
