MBK Partners criticizes Korea Zinc for allegedly investing in distressed firms

Private equity firm MBK Partners on Thursday criticized Korea Zinc Inc. for allegedly investing in distressed firms and the deteriorating financial health of the world’s largest zinc smelter, while expressing confidence that its tender offer to buy a stake in Korea Zinc will not fail.

MBK Partners Vice Chairman Kim Kwang-il made the remarks less than a week after the private equity firm launched a 2 trillion-won (US$1.5 billion) tender offer to buy a maximum 14.6 percent stake in Korea Zinc.

Korea Zinc’s liabilities had stood at 1.4 trillion won as of June this year, compared with 41 billion won in 2019, Kim told reporters.

Kim blamed Korea Zinc for making inappropriate investments in opaque firms, including OneAsia Partners, which has been accused of allegedly inflating stock prices of SM Entertainment.

“Plainly speaking, it spends cash like water,” Kim said.

Asked about whether the tender offer would succeed or not, Kim replied, “I don’t think that it will fail.”

However, Kim hinted that MBK Partners would not increase the offer price.

Kim also defended the tender offer for Korea Zinc Inc., saying it is not a hostile takeover bid.

“We are making a tender offer to boost our stake as the largest shareholder, not to engage in a hostile takeover or merger,” Kim said.

“This tender offer is part of a management buyout agreed upon with the current majority shareholder,” he added.

The tender offer has sent Korea Zinc’s stock to a record high. At one point during Thursday trading, shares of Korea Zinc jumped 7.36 percent to 715,000 won.

The firm reached an agreement with Young Poong Corp., Korea Zinc’s largest shareholder, which currently holds a 33 percent stake. Korea Zinc itself holds 2.4 percent, while its owner family has 15.5 percent.

Korea Zinc has strongly opposed MBK Partners’ share purchase, calling it a hostile takeover bid.

Kim said Young Poong has agreed to transfer its position as the largest shareholder to MBK Partners, prompting the tender offer to increase the equity firm’s stake.

Meanwhile, unionized workers at Korea Zinc expressed concerns that the world’s largest nonferrous metals manufacturer is at risk of being taken over by a corporate raider, urging the government to intervene.

“We will not tolerate a predatory tender offer that threatens our stable jobs and family livelihoods,” the workers said. “MBK Partners should immediately withdraw the tender offer, and the government should take action to prevent the sale of Korea Zinc, a key national industry, to foreign entities.”

Korea Zinc and Young Poong Corp. have a long-standing partnership, dating back to when the former was co-founded in 1974 by Chang Byung-hee and Choi Ki-ho. Over the years, the Choi family has managed Korea Zinc, while the Chang family oversees Young Poong Group and its affiliates.

However, a management dispute has strained the relationship between the two companies since 2022.