SEOUL: A South Korean court has denied Young Poong’s request to stop Korea Zinc from buying back its shares, causing Korea Zinc’s stock to hit a record high.
Following this decision, Young Poong plans to sue Korea Zinc, suggesting a potential legal battle over the company’s control.
Young Poong is partnering with MBK Partners to gain a controlling interest in Korea Zinc, prompting Korea Zinc to propose a $2.6 billion share buyback offer alongside Bain Capital.
Young Poong claims that Korea Zinc’s executives, including Chairman Yun B. Choi, are violating their duties by offering to repurchase shares at inflated prices, which could increase the company’s debt.
The court stated that Young Poong’s evidence did not sufficiently prove that the executives violated fiduciary duties. While the debt-to-equity ratio could rise significantly, the court noted that such a ratio is not unusual among listed companies. Additionally, the court argued it’s challenging to assess the current value of Korea Zinc shares, which have increased over 50% since MBK’s tender offer started.
The court did not find the share buyback plan to be a breach of trust since Korea Zinc intends to cancel the repurchased shares, and South Korean law permits share repurchases to enhance management control.
MBK expressed disappointment with the ruling, fearing it may negatively affect both Korea Zinc’s financial situation and South Korea’s corporate governance.
Korea Zinc’s stock closed up 6.4% at an all-time high of 877,000 won, nearing the $890,000 tender offer price.
MBK will provide updates after Korea Zinc’s tender offer ends on Wednesday. MBK and Young Poong have already obtained over a 5% stake in Korea Zinc, setting the stage for a boardroom battle at the upcoming shareholder meeting.
(Note: $1 = 1,367.7700 won)
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