2024-12-24
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[Executive Summary] – MBK & YP’s true intent is a hostile takeover, thereby robbing other shareholders of the opportunity to get a fair value through an acquisition that prices in laid-out synergies – Young Poong prioritizes securing cash flow from Korea Zinc and is facing activists themselves due to their low shareholder value creation and questionable governance practices – MBK clearly lacks a track record and understanding of smelting or related businesses. They failed to propose an original growth plan for Korea Zinc, repeating current management’s already Troika Drive |
1. MBK & YP’s true intent is a hostile takeover, thereby robbing other shareholders of the opportunity to get a fair value through an acquisition that prices in laid-out synergies
| * Although Young Poong is not conducting an official acquisition, MBK has highlighted synergies between YP and KZ
* Young Poong and MBK have not made their proposals through conventional channels, such as requesting engagement meetings. * They escalated to the most aggressive approach from the beginning, calling in an EGM two months before the AGM, not giving investors enough time to review proposals * Despite being one of the world’s largest zinc smelters, Young Poong lacks sufficient facilities to handle hazardous substances like sulfuric acid generated from its operations, relying on Korea Zinc to manage 400,000 tons of sulfuric acid annually * Korea Zinc, due to aging sulfuric acid management facilities, safety and legal risks associated with handling hazardous chemicals, and limited space from increased production, notified Young Poong of its decision not to renew the handling agreement. However, Young Poong opposed this decision and filed a lawsuit, pressuring Korea Zinc to continue managing its sulfuric acid |
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“Normalize Business Relationship with Young Poong” “The Consortium plans to end the dispute between the two companies, normalize business relations and restore competitiveness in raw material sourcing and product sales of both companies.” MBK’s actions clearly indicate their priority is improving Young Poong’s shareholder value at the expense of Korea Zinc’s value |
2. Young Poong, prioritizes securing cash flow from Korea Zinc’s and is facing activist themselves due to their low shareholder value creation and questionable governance practices
– Young Poong has reported net losses for three consecutive years (four straight years excluding dividends from Korea Zinc) and conducted a campaign during the previous AGM to request increased dividends from Korea Zinc
| Unit: KRW bn | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Dividend Paid by KZ | 56 | 71 | 78 | 104 | 104 | 79* |
* KRW 100 bn treasury share cancellation not included
Despite KZ’s increasing shareholder return, Young Poong is criticized for its poor shareholder return
① Metrica, which holds about 1.5% of Young Poong’s shares, highlighted that dividends received by Young Poong from Korea Zinc increased significantly, yet the dividends distributed to Young Poong’s own shareholders have remained stagnant
② Metrica’s founder and CIO, Damian Edwards, criticized Young Poong for showing little intent to address its undervalued stock price and for failing to share the benefits of Korea Zinc’s growth with its shareholders.
3. MBK clearly lacks a track record and understanding of smelting or related businesses. They failed to propose an original growth plan for Korea Zinc, repeating current management’s already Troika Drive
– MBK’s portfolio has been centralized on consumer discretionary, financial services, and life cycle care, with no experience in smelting or related business sectors
– MBK’s M&A records represent a lack of comprehensive and profound understanding of the industry
“Maintain Current Plan” : Due to their inexperience in this industry MBK is not able to create original plan
