SEOUL: A South Korean court has denied Young Poong’s request to block Korea Zinc’s tender offer to buy back shares, leading to a surge in the company’s stock price.
Following the court’s decision, Young Poong announced plans to file a lawsuit, indicating a drawn-out legal dispute over the control of Korea Zinc.
Young Poong is teaming up with MBK Partners to gain a controlling stake, which prompted Korea Zinc to partner with Bain Capital for a $2.6 billion share buyback offer.
Young Poong argued that Korea Zinc’s executives were acting against their duties by proposing to buy back shares at inflated prices, potentially harming the company while strengthening their control.
The court found Young Poong’s evidence insufficient to prove wrongdoing by Korea Zinc’s executives.
Korea Zinc’s debt-to-equity ratio may rise significantly after the buyback, but the court noted it’s not unusual compared to other public companies. It also stated that the value of Korea Zinc shares remains hard to define, as they have increased over 50% since MBK’s bid.
The court ruled that Korea Zinc’s buyback plan doesn’t equate to a breach of trust since the acquired shares will be canceled, and South Korean law allows for such buybacks to enhance management control.
MBK expressed disappointment at the ruling, fearing it could negatively affect corporate governance and capital markets in South Korea.
Korea Zinc’s shares rose 6.4%, reaching a record high of 877,000 won, close to the tender offer price of 890,000 won.
MBK plans to update on its strategy for a special shareholder meeting after the tender offer closes on Wednesday.
MBK and Young Poong have acquired over 5% of Korea Zinc’s shares through their bid, setting the stage for a boardroom showdown at the upcoming meeting.
($1 = 1,367.7700 won)
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