MBK Partners, a private equity firm based in Seoul, has stepped into another corporate takeover battle. This time, MBK Partners is targeting Korea Zinc, South Korea’s leading non-ferrous metal producer, by launching a 2 trillion won ($1.5 billion) tender offer to secure a controlling stake in the company.
Following an unsuccessful attempt last year to gain control of Hankook & Company, the parent company of Hankook Tire, MBK Partners has now partnered with Young Poong in a bid to secure a majority stake in Korea Zinc and oust its current chairman, Choi Yun Beom, of management control. MBK Partners’ entry into the fray marks a new phase in the ongoing power struggle between Young Poong and Chairman Choi over Korea Zinc.
MBK Partners recently announced a shareholder agreement with Young Poong, Korea Zinc’s largest shareholder, and other related parties to buy additional stakes in the smelter to become its largest shareholder, according to sources with knowledge of the matter on Sept. 13.
Under this agreement, MBK and Young Poong will jointly exercise voting rights, but MBK Partners will take the lead in decision-making. MBK has also secured a call option on shares held by Young Poong and its related parties, which, if exercised, would allow MBK to own just one more share than Young Poong in Korea Zinc.
MBK Partners will launch a tender offer for additional shares of Korea Zinc from Sept. 13. to Oct. 4. It plans to purchase 1.4 to 3 million shares at 660,000 won per share, an 18.7% premium to the stock’s previous closing price of 556,000 won. The firm’s plan to acquire 7% to 14.6% of Korea Zinc could cost the private equity firm $718 million to $1.5 billion. With over $8.5 billion in available funds, MBK should have no problem financing the purchase.
MBK Partners and Young Poong aim to secure a controlling stake of 47.7% in Korea Zinc through this tender offer. Currently, Young Poong owns 25.4% of the company. Members of the Jang family, the owners of Young Poong and Youngpung affiliates Korea Circuit and Terranix, hold an additional 7.7%.
Excluding non-voting treasury shares, the tender offer could boost MBK Young Poong’s combined stake to nearly 52%, giving them effective control over the company. With MBK holding a call option on the shares owned by Young Poong and the Jang family, a successful tender offer would likely lead to a transfer of management control to the private equity firm.
To strengthen its position even further, MBK Partners has set up an additional tender offer for shares in Young Poong Precision, a company controlled by Chairman Choi. MBK Partners will launch a tender offer to buy up to 6.88 million shares (43.43%) of Young Poong Precision at 20,000 won per share.
Currently, Chairman Choi holds a larger stake in Young Poong Precision, and the Jang family owns 21.25%. If this tender offer is successful, the Jang family’s stake will increase to 64.68%. Since Young Poong Precision holds a 1.85% stake in Korea Zinc, this would further consolidate MBK and Young Poong’s voting power in Korea Zinc.
