Refer Report

The court decision that will decide the outcome of the Korea Zinc management dispute is expected to be made on the 2nd. What the court must decide is whether Korea Zinc can purchase its own shares to counter the ongoing tender offer for the purpose of replacing the current management. If share buybacks are allowed, Korea Zinc Chairman Choi Yoon-beom, who has not been able to come up with a clear counter-tender offer plan, will have a strong defense tool, so the situation is expected to be greatly shaken.

As a result of covering the business and legal circles on the 30th, the 50th Civil Division of the Seoul Central District Court is expected to make a judgment on October 2nd on whether Korea Zinc can acquire treasury shares during the tender offer period by Youngpoong and private equity fund MBK. It seems. Both sides believe that in order for Korea Zinc to begin purchasing its own shares before October 4, the last day for Youngpoong and MBK to apply for tender offers, a conclusion must be reached on the 2nd at the latest.

Previously, on the 27th, Youngpoong filed an application for a temporary injunction against Chairman Choi and Korea Zinc to prohibit the purchase of their own shares. Youngpoong’s position is that Korea Zinc, of which Youngpoong is the largest shareholder, is a specially related party to Youngpoong under the Capital Markets Act, so they cannot purchase stocks through methods other than a tender offer, such as a share purchase, during the tender offer period. On the other hand, Korea Zinc argues that since Youngpoong is no longer a specially related party after attempting a ‘hostile merger’, it can defend itself through share buybacks.

If Korea Zinc is able to purchase its own shares with company money, the situation could turn in Chairman Choi’s favor. By mobilizing the company’s financial power, it can make a winning move by purchasing its own shares at a higher price than the 750,000 won per share suggested by Youngpoong and MBK. It is known that Korea Zinc has cashed in around 2 trillion won in funds through the issuance of commercial paper (CP), loans from securities companies, and liquidation of liquid assets.

If the court rules in favor of Youngpoong, Chairman Choi will have no choice but to launch a counter tender offer using allies he has secured behind the scenes. It is known that Chairman Choi has discussed financial support behind the scenes with Hanwha Group and Kohlberg Kravis Roberts (KKR). An official from Korea Zinc said, “Once the court ruling is made, we will disclose our response plan accordingly.”

Reporter Nam Ji-hyeon southjh@hani.co.kr

Source: Korean