Korea Zinc to make $2 billion share tender offer in bid to fend off takeover

SEOUL :Korea Zinc said it was making a public tender offer to buy an up to 16 per cent stake in the company for 2.7 trillion won ($2.0 billion), seeking to fend off what it has termed as a hostile takeover attempt on the world's biggest refined zinc producer.

Run by the Choi family, Korea Zinc has been in a bitter battle for control of the $12 billion zinc empire with the co-founding Chang family, whose electronics conglomerate Young Poong made a joint $1.74 billion bid with private equity firm MBK Partners for Korea Zinc in September.

The tender offer raises the stakes for the two sides as it is priced 11 per cent higher than the Young Poong-MBK bid, which will have to be raised if it is to succeed. For Korea Zinc, funding the offer will mean a near tripling of borrowings.

The fight for control comes at a crucial time for South Korea, which is trying to implement corporate governance reforms to give a boost to its moribund capital markets that have been stymied by the influence exerted by its conglomerates. Minority shareholders, who own about 27 per cent of the Korea Zinc, will likely play a crucial role in the outcome of the takeover battle.

Young Poong was founded in 1949, just a year before the Korean War broke out, by the two co-founders who were born in North Korea, as a trading company. It expanded into the refining business, creating Korea Zinc in 1974. Scions of the two families have since been managing them separately.

But Young Poong, known for its popular bookstore chains in Korea and as a maker of smartphone parts, recently tied up with MBK Partners to tighten its control over Korea Zinc, triggering a bitter legal battle and a takeover feud between the two firms.

Korea Zinc offered on Wednesday to buy back about 2.7 trillion won worth of shares and Bain Capital offered to buy 430 billion won worth, setting the tender offer at a maximum of 830,000 won each. Korea Zinc shares ended up 3.6 per cent at 713,000 won on Wednesday.Korea Zinc said the tender offer will start on Friday and that its borrowing will increase to 4.2 trillion won from 1.58 trillion won.

Earlier on Wednesday, the Seoul Central District Court rejected a request by Young Poong to block Korea Zinc from launching a buyback to counter its tender offer.Last month, Young Poong and MBK Partners launched a 2 trillion won tender offer for shares in Korea Zinc, before raising the offer to 2.3 trillion won last week. That offer closes on Friday.

Besides the share buyback, the Korea Zinc management also made a separate tender offer on Wednesday to solidify control over the firm.

Jerico Partners, a special purpose company established by Korea Zinc chairperson Choi Yoon-beum and his family, made a tender offer to buy 25 per cent of shares of affiliate Young Poong Precision for 118 billion won.

That was in response to the offer by rival MBK to buy shares in the pump and valve maker, which holds a minor stake in Korea Zinc.

($1 = 1,318.4500 won)