SEOUL: A South Korean court has denied Young Poong’s request to stop Korea Zinc from buying back its shares, leading to a record high for the world’s largest zinc refiner’s stock.
After the court ruling, Young Poong announced plans to file a lawsuit, indicating a prolonged legal conflict over the company’s control.
Young Poong, in partnership with MBK Partners, aims to gain a controlling interest in Korea Zinc, prompting Korea Zinc to team up with Bain Capital for a $2.6 billion share buyback offer.
Young Poong alleged that Korea Zinc’s leaders violated their duties by proposing to buy back shares at inflated prices, which could increase company debt but strengthen executive control.
The court stated that Young Poong didn’t provide enough evidence of fiduciary duty violation and noted that the debt-to-equity ratio would increase, but it remains comparable to other listed companies.
The ruling pointed out that Korea Zinc plans to cancel the repurchased shares, and there are no legal barriers to buybacks to enhance management control in South Korea.
MBK expressed disappointment with the ruling, concerned about its implications for Korea Zinc’s finances and corporate governance in the country.
Korea Zinc shares rose 6.4% to a record 877,000 won, nearing the buyback offer price of 890,000 won.
MBK plans to update shareholders after the buyback period ends on Wednesday.
Through their tender offer, MBK and Young Poong have acquired over 5% of Korea Zinc, setting the stage for a boardroom showdown at the next meeting.
(Exchange rate: $1 = 1,367.7700 won)
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