Korea Zinc Co., the world’s largest refined zinc producer, announced Tuesday that it is carefully reconsidering a controversial $1.8 billion share sale plan. The plan, which initially surprised the market and sparked significant backlash from both regulators and investors, remains under scrutiny as the company evaluates its next steps. Korea Zinc stated that it will take into account the concerns raised by the Financial Supervisory Service (FSS) and shareholders before reaching a final decision.
Korea Zinc’s announcement coincided with its quarterly earnings report, a moment shareholders had anticipated would provide clarity following weeks of uncertainty. The sudden announcement of the share sale, following a substantial stock buyback, led the FSS to initiate an investigation and prompted a marked sell-off in Korea Zinc’s stock. In a conference call on Tuesday, Korea Zinc informed analysts that it was “seriously considering” the feedback from both regulators and investors, emphasizing that an official announcement would follow after further internal discussions. While no precise timeline was offered, local media suggested a board meeting may take place on Wednesday to decide on the sale’s future.
Korea Zinc has become the focal point of a high-stakes battle between two major shareholder groups: one led by the company’s chairman, Choi Yun-beom, and another consisting of the company’s largest shareholder, Young Poong Corp., backed by private equity firm MBK Partners Ltd. The rift first surfaced in September when MBK Partners joined forces with Young Poong to launch an unsolicited bid for Korea Zinc, igniting a public clash over the company’s control.
Choi Yun-beom’s proposed share sale would involve issuing shares at an indicative price of around 670,000 won each, which represents a 33% discount to the current market price. The move, Choi claims, would help Korea Zinc raise capital to reduce debt and strengthen the company’s finances. However, investors have criticized the pricing of the sale, viewing it as an attempt to consolidate control by attracting supportive shareholders.
The contentious situation has underscored growing concerns around corporate governance practices within South Korea’s family-run business conglomerates. Analysts point out that Korea Zinc’s case may have implications beyond the company itself, shedding light on the pressures that South Korea’s wealthy families face in maintaining business control while responding to rising demands for transparency and equitable governance.
Korea Zinc’s financial performance for the third quarter showed a mixed picture. The company reported an operating profit of 149.98 billion won (approximately $107 million), a decline of 6.5% compared to the same period last year. While revenues saw an increase, the company struggled with persistently low metal prices that weighed down its earnings. The operating profit result came in considerably lower than analysts’ consensus estimate of 266.5 billion won.
Looking ahead, analysts are optimistic that the recent upswing in the London Metal Exchange (LME) zinc prices could help lift Korea Zinc’s earnings in the fourth quarter. “Fundamentally, the recent strength in LME metal prices should bode well for its 4Q24 earnings,” said James Hong, an analyst at Macquarie Securities Korea Ltd. “Moreover, operational suspension at Young Poong, another major zinc smelter in the duopoly market, should help Korea Zinc to grow market share.”
The company expects that increased market share and improved metal prices will help Korea Zinc recover some of its lost momentum by year-end.
In an unusual twist, the ongoing dispute over Korea Zinc’s future has attracted the involvement of private equity firms, an influence not commonly observed in Korea’s family-owned conglomerates. MBK Partners’ decision to partner with Young Poong Corp., which currently holds 39.8% of Korea Zinc, represents a powerful alliance that could threaten Chairman Choi Yun-beom’s leadership. Choi, who has maintained backing from private equity giant Bain Capital, controls roughly 35% of the company, even after a recent share buyback.
The rivalry between the two camps has highlighted the broader role of private equity in shaping corporate governance in South Korea. Private equity firms like MBK Partners and Bain Capital are bringing a new level of accountability and competition, pressing family-run businesses to modernize their practices. Analysts warn that this high-profile clash may set a precedent for other conglomerates, especially as regulatory bodies and foreign investors demand greater transparency.
“This is a defining moment not just for Korea Zinc but for other chaebols as well,” said an industry expert. “The presence of international private equity has added a level of scrutiny that local families are not accustomed to, which may lead to broader governance reforms in South Korean industry.”
Despite initial losses in the stock following the open on Tuesday, Korea Zinc’s shares rebounded strongly, surging by as much as 5.3% and ultimately outperforming the benchmark Kospi index. As of 12:24 p.m. in Seoul, Korea Zinc’s stock was trading at 1,186,000 won, up 5.4%. The stock’s sharp recovery reflects the volatility and uncertainty surrounding Korea Zinc’s future, as well as a measure of investor optimism regarding a potential resolution.
In recent months, Korea Zinc’s share price has nearly doubled, propelled by increased interest following the public feud and the belief that a change in corporate governance could unlock more value. The company’s valuation now places it among the most valuable firms in South Korea, underscoring the stakes for both domestic and international investors as they await the company’s decision on the share sale.
Korea Zinc’s role as a major global supplier of refined zinc places it in a unique position within the broader metals industry. The company’s output is vital to the global energy transition, as zinc is used extensively in applications ranging from renewable energy storage to electric vehicles. Analysts emphasize that stability within Korea Zinc is crucial not only for South Korea but also for the global supply chain, as industries seek alternatives to Chinese-dominated metals markets.
“Any disruption within Korea Zinc would have wide-ranging effects,” said a senior metals analyst. “Given its significance to the green energy transition, stability and solid governance are essential to ensuring supply continuity.”
Chairman Choi’s decision to propose a discounted share issuance reflects the broader financial and operational pressures facing the company. With growing debt and the need to maintain a competitive edge, Korea Zinc’s management must balance short-term financial strategies with long-term growth considerations. The $1.8 billion share sale, while divisive, represents an attempt to address these challenges, although some investors believe that alternative measures could achieve the same objectives without diluting shareholder value.
The FSS’s involvement in Korea Zinc’s case reflects an increasing trend of regulatory oversight in South Korea’s financial sector. In response to rising public and investor demands for transparency, South Korea’s regulatory agencies have adopted a proactive approach in monitoring corporate actions that may have significant implications for shareholders.
Financial watchdogs and policymakers are particularly concerned about safeguarding minority shareholder rights and ensuring that major decisions, such as share issuances, are made in a fair and transparent manner. The ongoing investigation into Korea Zinc’s share sale plan highlights the FSS’s commitment to upholding these principles, and analysts predict that further regulatory guidance may be forthcoming as the situation develops.
For Korea Zinc, the regulatory scrutiny may serve as a catalyst for broader reforms, pushing the company to adopt stronger governance practices. Observers suggest that Korea Zinc could adopt a more open and collaborative approach to engage with investors and demonstrate its commitment to fair practices.
