Korea Zinc sweetens offer price for own shares as takeover battle heats up

Korea Zinc Inc. said Friday it has raised the tender offer price for its own shares as a battle with Young Poong Corp. and private equity firm MBK Partners heated up for control of the world’s biggest zinc smelter.

The offer price increased to 890,000 won (US$660) per share from the current 830,000 won, Korea Zinc said in a regulatory filing.

The company also plans to acquire 17.5 percent of its total shares, or 3.62 million shares, through the tender offer, an increase from its earlier plan to purchase 15.5 percent.

U.S. private equity firm Bain Capital, which has sided with Korea Zinc for the tender offer project, will purchase 2.5 percent, or 517,000 shares, worth 400 billion won.

As a result, Korea Zinc will need a total of 3.69 trillion won for the purchase, including 470 billion won for Bain Capital, up from the initially planned 2.66 trillion won.

“The decision was made after repeated consideration and discussion by the board of directors after listening to market conditions and the concerns of financial authorities,” Korea Zinc said in a statement.

“We will continue to normalize the company as soon as possible after successfully completing the tender offer,” it added.

The decision came on the last trading day without extending the period of tender offer, which is scheduled to end on Oct. 23.

Korea Zinc’s price hike came a week after Young Poong and MBK Partners announced plans to raise their offer price for Korea Zinc to 830,000 won per share.

Shares of Korea Zinc rose 0.63 percent to close at 794,000 won on the Seoul bourse, outperforming the broader Korea Composite Stock Price Index’s 0.09 percent drop.

Subsequently, Young Poong and MBK Partners released a statement, claiming that the price hike will leave Korea Zinc with 2.7 trillion won in debt.

They said Korea Zinc needs 3.2 trillion won for the tender offer, which accounts for 97.1 percent of the zinc smelter’s net profit for the past five years and 152.5 percent for the past three years.

“Korea Zinc shareholders will be left with a company that is financially and profitably worse off,” they said. “And the future of the company will be uncertain as valuable resources that should be used to grow the company will be consumed.”

The battle for management control of Korea Zinc has heated up as MBK teamed up with Young Poong and launched the public tender offer in mid-September to acquire a stake of up to 14.61 percent in the smelter.

Young Poong and investors supportive of it control a 33.13 percent stake, while Choi, the chairman of Korea Zinc, and his supporting investors control a 33.99 percent stake, according to industry sources.

The ongoing conflict marks the end of decadeslong cooperation between Young Poong and Korea Zinc, which were co-founded in 1974 by Chang Byung-hee and Choi Ki-ho.