Korea Zinc Co. is still evaluating whether to move forward with its contentious $1.8 billion share sale, acknowledging concerns from both regulators and investors, the company confirmed on Tuesday. Shareholders had been eagerly awaiting an update on the matter alongside the company’s quarterly earnings report, following a surprising share issuance announcement two weeks ago, which triggered a market sell-off and an investigation by the financial watchdog.
During its earnings call, Korea Zinc indicated that it is “seriously considering” the feedback it has received from regulators and shareholders, and would announce a decision after further internal reviews and discussions. Although the company refrained from providing specific timing, local reports suggest that the board could meet on Wednesday to decide whether to proceed with the share sale.
Korea Zinc, the world’s leading producer of refined zinc, finds itself in the midst of an ongoing power struggle between two major shareholder factions. One side is led by Chairman Choi Yun-beom, while the other side is represented by the company’s largest shareholder, Young Poong Corp. and private equity firm MBK Partners.
Choi’s plan involves selling shares at an indicative price of around 670,000 won each, which is more than 33% below the current market price. The majority of the funds would be used to reduce the company’s debt. However, the proposal has sparked investor concerns, particularly as it appears to be an attempt to consolidate shareholder support and raise questions about corporate governance practices.
The dispute between Korea Zinc’s competing shareholder camps escalated publicly in September, when MBK Partners and Young Poong Corp. launched an unsolicited bid for control of the company. Together, they now control 39.8% of Korea Zinc, a key player in the global efforts to diversify the supply of metals needed for the energy transition. Meanwhile, Choi’s faction, supported by Bain Capital, owns about 35% of the company following a buyback last month.
For the third quarter, Korea Zinc reported an operating profit of 149.98 billion won ($107 million), marking a 6.5% decline from the same period last year despite higher revenue. Weak metal prices were cited as a factor in the decline, with analysts having expected a figure closer to 266.5 billion won. The company projected a rebound in earnings for the fourth quarter.
James Hong, an analyst at Macquarie Securities Korea Ltd., noted that the rise in LME metal prices should bode well for Korea Zinc’s fourth-quarter performance. Additionally, operational disruptions at Young Poong, another significant player in the zinc smelting market, could help Korea Zinc increase its market share.
The high-profile dispute over Korea Zinc is noteworthy even in South Korea, where succession battles among wealthy business families are not uncommon. The public nature of this conflict, along with the involvement of private equity, has drawn attention. The outcome of this battle is likely to have broader implications for other South Korean conglomerates, many of which have faced scrutiny over their corporate governance practices and lack of transparency.
Despite initial declines in share price on Tuesday, Korea Zinc saw a recovery, with its stock rising by as much as 5.3%, outperforming the broader Kospi index. By midday, the shares were trading at 1,186,000 won, up 5.4%. Since September, Korea Zinc’s stock price has nearly doubled, positioning the company as one of Seoul’s most valuable enterprises.
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