2024-09-13
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Korea Zinc, the global leader in non-ferrous metals and “Guardian of National Core Industries” opposes the hostile takeover attempt by MBK Partners, a speculative private equity fund and predatory corporate raider |
(Seoul, Korea – September 13, 2024) Korea Zinc Company, Ltd. officially expresses its opposition to a unilateral tender offer launched by Korea Zinc’s shareholder Young Poong Co., Ltd. in collusion with MBK Partners known for its corporate raiding practices.
Korea Zinc views this tender offer as a hostile and predatory M&A attempt by a corporate raider targeting our company, the world’s number one market share holder in the non-ferrous metals sector, a key national industry. Thus, we clearly state our opposition to this tender offer.
Korea Zinc’s current management, the driving force behind the company’s top position in the non-ferrous metals market, is well-equipped with business skills and future vision
Through domestical capital, independently developed technologies and collective commitment of all employees in resource-scarce South Korea, Korea Zinc has risen to the top of the global non-ferrous metals market (zinc, lead, silver, indium). As a leader in non-ferrous metals, one of the backbones of the national economy, Korea Zinc has made a significant contribution to raising Korea’s stature on the global scene.
Moreover, beginning with founder Choi Ki-ho and continuing through honorary chairmen Choi Chang-gul, Choi Chang-yeong and Choi Chang-geun, and to the current chairman Yun B. Choi, our past and present management teams and employees have combined their industry expertise, management know-how and pioneering technology over decades to achieve global competitiveness and a leadership position in non-ferrous metals.
Korea Zinc is not stopping here. From the current management down to every employee, Korea Zinc is committed to raising capital domestically, developing technologies independently and enhancing its competitiveness in the rechargeable battery sector, one of the Korean government’s future strategic industries. This is to ensure Korean corporations’ independence from Chinese capital and companies.
Young Poong’s repeated violations of the Environmental Act and Serious Accidents Punishment Act as well as massive losses testify to the lack of managerial competency
In contrast, Korea Zinc’s shareholder Young Poong, which is proceeding with the tender offer in collusion with MBK, a speculative private equity fund and predatory corporate raider, has caused significant environmental damage to the local communities and the Nakdong River system while operating its Seokpo smelter.
Moreover, Young Poong’s co-CEOs have been recently arrested and detained due to the frequency and severity of major industrial accidents and are facing additional criminal charges for environmental violations in the wake of a cadmium dumping scandal. Amid a public outcry, Young Poong finds itself entangled in a profound crisis to the point of a breaking point. What’s worst, even following a series of safety accidents, workplace fatalities and environmental pollution problems, they have been left unaddressed for years. Young Poong is one of the few companies that come under the scrutiny of the national parliamentary audit committee almost every year.
Despite the continued emergence of Seokpo smelter’s social issues such as layoffs, Young Poong is so engrossed in securing Korea Zinc’s management right and shares in collusion with the predatory private equity fund that it has neglected its duties to normalize the smelter’s management and address its safety and environmental issues. Young Poong’s failures to fulfill its duties has been a misfortune for not only our employees but also for themselves.
MBK Partners, a predatory speculative capital, raises concerns over its impact on Korea’s national backbone industry and its role in technology leakage
Notably, the private equity fund MBK Partners has been engaging in predatory practices by taking over competitive homegrown companies, selling off their core assets or collecting excessive dividends only to recoup its investments. Its predatory practices are not limited to asset stripping but often involve unfair dismissals, negatively affecting employees at target companies and local communities and undermining the enterprise value of their targets.
In addition, MBK Partners has long been criticized for its corporate raiding and speculative activities by politicians and the media. The media expects that MBK Partners’ predatory practices against Korean companies will come to focus during this year’s parliamentary audit.
If a private equity fund of this nature takes over Korea Zinc’s management, it is highly likely to cause a serious damage to our employees, local communities and stakeholders. The chances are also high that management decisions are made unilaterally in order to generate investment returns, the ultimate goal of a private equity fund, at the expense of other stakeholders.
Through its strategic initiative titled Troika Drive, Korea Zinc has been working to secure new growth drivers such as Secondary Battery Materials, Renewable Energy and Hydrogen, and Resource Recycling, leveraging its competitiveness in the traditional refining business. If Korea Zinc’s management right is taken away through the hostile takeover attempt, the key business strategies will be at high risk of being derailed, taking a heavy toll on shareholders’ value.
Above all, it should be noted that MBK Partners is known to hold call options on the shares owned by Young Poong and its affiliated persons. It supports the high likelihood that once the hostile takeover comes through, the acquirer in collusion with the predatory PE will resell the management right of Korea Zinc to overseas capital. If such is the case, there are concerns over the loss of key technologies and capabilities related to the national backbone industries and rechargeable battery materials to overseas.
A hostile takeover by Young Poong and MBK Partners to significantly undermine the enterprise value and shareholders’ value
Currently, Young Poong’s former CEO Jang Hyung-jin is seeking to acquire Korea Zinc’s management right in collusion with a private equity fund known for its corporate raiding practices. It is a hostile takeover attempt by Jang Hyung-jin, the failed former CEO of the crisis-hit Young Poong and Seokpo smelter, against the will of Korea Zinc’s management, which has demonstrated its business acumen by solidifying Korea Zinc’s market leading position over the past 50 years. Korea Zinc believes that the tender offer, if successful, will undermine Korea Zinc’s enterprise value in the medium and long term, thereby hurting the interest of its stakeholders, not to mention minority shareholders.
Given the unique nature of nonferrous metals refining, which is the backbone of the national economy, and the company’s world-class technology and knowhow, Korea Zinc believes its core competitiveness lies in the current management’s time-tested industry expertise and managerial knowhow, and the management’s long-term vision and global networks are crucial to the company’s path to sustainable growth.
The comparison between Young Poong, where Jang Hyung-jin had sat as CEO for a long time, and Korea Zinc under the current management reveals gaping differences on every aspect—global competitiveness, earnings performance, shareholders return, corporate social responsibility and ESG, to name just a few. Moreover, corporate raiders such as MBK Partners, which is Young Poong’s ally, are interested only in short-term profits, which is incompatible with Korea Zinc’s commitment to fostering rechargeable battery materials as Korea’s strategic industry and growth engine and enhancing its enterprise value in the medium and long term.
In a nutshell, if the public buyers take over Korea Zinc’s management right, it is obvious that the company is bound to lose its enterprise value and global competitiveness in no time.
Korea Zinc’s management is dedicated to increasing the enterprise value and shareholders value
Building on its distinctive business competitiveness and solid earnings performance-under the current management, Korea Zinc has implemented proactive shareholders return policies by introducing interim dividends on top of end-year dividends and share buyback/cancellation in order to further enhance shareholders’ value. Korea Zinc’s shareholders have actively supported such efforts by the current management. As a result, Korea Zinc’s current management has been highly recognized by the market as well as its shareholders. That said, it is impossible to expect financial investors, which have made a tender offer, or Young Poong’s failed CEO to replace Korea Zinc’s current management.
Under the leadership of the current management, Korea Zinc has been and will continue to be committed to ensuring sustainable growth, increasing shareholders’ value through various shareholder return policies and supporting its own employees and local communities. To this end, Korea Zinc asks for continued support and trust from all shareholders and stakeholders.
