MBK Special Situations relinquishes Korean investment advisory license

MBK Partners Special Situations (MBKP SS), which operates the Seoul-based private equity firm’s credit situations funds, has voluntarily relinquished its investment advisory license in the country.

MBKP SS recently submitted its request to cancel its domestic advisory license to the Financial Services Commission (FSC).

A separate legal entity from MBK Partners, MBKP SS employs a range of investment strategies beyond conventional buyouts to effectively acquire promising companies at low costs.

A subsidiary of MBK Partners’ Hong Kong branch, the firm led MBK Partners’ bid to acquire Hankook & Company Co., the holding firm of Korea’s top tire maker Hankook Tire & Technology Co. in late 2023.

MBKP SS is headed by MBK Partners Vice Chairman Jay H. Bu.

MOVE COMES AMID REGULATORY SCRUTINY

MBKP SS began investment advisory services in Korea in 2021.

The PEF said it is now giving up the license as it doesn’t need it any longer.

Following an amendment to the Capital Markets Act in 2021, private equity funds that focus on institutions, including MBK, can conduct investment advisory activities without a dedicated license, it said.

Industry watchers, however, said that the decision may be linked to mounting regulatory pressure.

MBKP SS faced allegations from Korea Zinc Inc., which is embroiled in a management dispute with the MBK Partners-Young Poong Corp. alliance.

Korea Zinc has accused MBKP SS of improperly sharing confidential business information obtained through an advisory service the PEF conducted for the metal smelter in 2022.

Korea Zinc later filed a complaint with the Financial Supervisory Service, alleging breach of a non-disclosure agreement (NDA).

“By relinquishing its license before the FSS’ possible launch of an inspection into the case, MBKP SS may be trying to preempt regulatory scrutiny,” said an industry official.

UNDER TAX AUTHORITY PROBE

MBK Partners is already under a probe by the National Tax Service (NTS) amid the brewing controversy over MBK’s management of Homeplus Co. and its hostile takeover bid for Korea Zinc.

The NTS audit follows MBK’s sudden filing earlier this month for court-led rehabilitation of Homeplus Co., a major Korean retail chain, which the private equity giant purchased from British retailer Tesco Plc in 2015 for 7.2 trillion won ($5 billion).

The development has sparked criticism over MBK’s business practices for the companies it invested in, including its wholly owned Homeplus.

On Tuesday, the National Pension Service (NPS), the state-run pension fund and Korea’s largest institutional investor, said it will not participate in investments related to hostile mergers and acquisitions led by MBK Partners Ltd.

With the latest statement, the NPS has made it clear that it will not comply with any future capital calls from MBK Partners if the funds are directed towards disputed investments.

Write to Jong-Kwan Park at pjk@hankyung.com

In-Soo Nam edited this article.