Korea Zinc chair reported to prosecutors over rights issue

South Korea’s Financial Supervisory Service (FSS) has reported Korea Zinc Inc.'s Chairman Choi Yun-birm and its board of directors to prosecutors for a fast-track investigation concerning a planned 2.5-trillion-won ($1.7 billion) rights issue, which it scrapped in November amid a regulatory probe.

According to financial and legal industry sources on Tuesday, the regulatory body alleged that Korea Zinc’s botched rights issue violated the country’s Capital Markets Act.

After performing an audit of the rights offering’s lead underwriter Mirae Asset Securities Co., the FSS said Korea Zinc’s top management misguided investors by failing to inform them of the rights issue plan when it tendered its shares in October.

The tender offer was aimed to defend against a takeover bid by the consortium of MBK Partners and Young Poong Corp. announced in September.

The MBK-Young Poong alliance is poised to win the battle as it is closer to majority control of Korea Zinc.

But the saga shows few signs of ending. To keep the consortium controlling its board of directors, the world's No. 1 zinc smelter is moving to introduce a cumulative voting system that would help Korea Zinc and its friendly shareholders appoint at least one director on their side. 

Write to Joon-Ho Cha and Ik-Hwan Kim at chacha@hankyung.com

Yeonhee Kim edited this article.