MBK ups Korea Zinc bid price as management feud intensifies

North Asia-focused private equity firm MBK Partners Ltd. has raised its bid price to take control of Korea Zinc Inc. by 13.6%, increasing the cost for the tender offer to up to 2.3 trillion won ($1.7 billion), as the battle for management of the world’s top zinc and lead smelter heats up. 

MBK said on Thursday in a regulatory filing that it ramped up the takeover bid price to 750,000 won per share from the initial 660,000 won. The new price is a 34.9% premium over Korea Zinc’s stock closing on Sept. 12 before the Seoul-based private equity firm announced the tender offer plan.

The higher bid price pushed up Korea Zinc shares by as much as 6.1% to 747,000 won, their strongest since Sept. 20. The shares have been higher than MBK’s initial bid prices after the buyout firm said it would take over the smelter in partnership with its largest shareholder Young Poong Group.

MBK and Young Poong Corp., the group’s controlling company, aim to buy up to 14.6% stake in Korea Zinc through a tender offer now estimated as high as 2.3 trillion won, the largest takeover bid in South Korean history.

The private equity firm also raised its tender offer price for Young Poong Precision Corp. to 25,000 won per share from the original 20,000 won, according to a separate regulatory filing.

The industrial pump and chemical plant valve maker, which holds a 1.85% stake in Korea Zinc, is controlled by the smelter’s current Chair Choi Yun-birm, who MBK and Young Poong Group aim to oust.

Young Poong Precision’s shares surged by as much as 11.2% to a record high of 25,300 won as the new bid price was 2.7 times its closing of 9,370 won on Sept. 12.

YOUNG POONG GROUP’S SUPPORT

To help MBK, Young Poong Corp. said on Wednesday that it provided a loan of 300 billion to Korea Corporate Investment Holdings Co., MBK’s special purpose company to gain management control of Korea Zinc.

Young Poong Group has said it would not use its own cash for the takeover bid as it needs money to invest in Young Poong Corp.’s smelting factory mired by environmental issues.

“We will collect the money (from MBK) after the tender offer is completed,” said a Young Poong Corp. official.

MBK is expected to raise more money from Young Poong and other investors as the private equity fund and the group may increase the bid price for Korea Zinc, investment banking industry sources said.

INTENSIFYING BATTLE

Korea Zinc is predicted to secure more money to fight MBK and Young Poong Group despite various countermeasures, industry sources said.

The smelter plans to raise 400 billion won by selling commercial papers, its first fundraising in the capital market in 23 years.

It also asked the government to designate its technology -- processing high-nickel precursors, materials for electric vehicle batteries -- as a national core technology to fend off a potential takeover by MBK.

Once Korea Zinc secures the status, MBK needs government approval to sell it to foreign investors.

“MBK is likely to face difficulties in selling Korea Zinc later as it has to find a domestic buyer if the company is designated as a company with a national core technology,” said an industry source.

Young Poong Group was founded by Chang Byung-hee and Choi Ki-ho in 1949. The group’s two major affiliates have largely been run by their descendants. The Chang family controls Young Poong Corp. and the electronic parts units, while the Choi family manages Korea Zinc and the non-electronics units.

Their conflict heated up as Korea Zinc, the conglomerate’s cash cow, issued new shares to Hyundai Motor Group and swapped treasury stocks with Hanwha Corp. and LG Chem Ltd.

Write to Woo-Sub Kim, Ik-Hwan Kim, Jun-Ho Cha and Hyun-Ju Jang at duter@hankyung.com
 
Jongwoo Cheon edited this article.