MBK warns of criminal accusation; Korea Zinc invites rivals on board

Top executives of Korea Zinc speak at a press conference held at Grand Hyatt Seoul, Friday. (Yonhap)
Top executives of Korea Zinc speak at a press conference held at Grand Hyatt Seoul, Friday. (Yonhap)

After four months of power struggle and a 13-hour shareholder meeting on Thursday, the battle over management control of the world’s largest refined zinc smelter Korea Zinc is likely to continue.

While the thwarted MBK-Young Poong coalition signaled its intent to press criminal charges, Korea Zinc suggested collaborating with its rival, inviting MBK Partners to join its management.

On Thursday, Korea Zinc's current management tied the hands of the MBK-Young Poong coalition by completing a cross-shareholding structure and limiting Young Poong’s voting rights.

MBK-Young Poong stressed the current management of Korea Zinc is crossing a line with its actions.

“Chairman Choi has become a law-breaker, crossing the line out of desperation to defend his management rights in using a cross-shareholding strategy, which can be held liable under the Fair Trade Act," MBK Partners Vice Chairman Kim Kwang-il said at an online press conference held Friday.

"We will press criminal charges on Choi, President Park Ki-duk and the Choi family," Kim said. He said the alliance will file an injunction against the measures to take immediate action before the general shareholder meeting slated for March.

Meanwhile, the current management of Korea Zinc took a turn in its stance against MBK, toning down its hostility and suggesting cooperation.

“Korea Zinc can pursue a better future with MBK,” Korea Zinc President Park Ki-duk said at a press conference held in central Seoul, Friday.

“Private equity firm MBK could have a positive impact (on Korea Zinc) as its partner,” Park said.

While MBK-Young Poong has mentioned that the current Korea Zinc management could continue to participate in management even if the coalition gains control, Korea Zinc’s management had been nonchalant about the suggestion.

Korea Zinc reported Wednesday that its Australian subsidiary Sun Metal Corporation secured a 10.33 percent stake in Young Poong. This completed a cross-shareholding structure for Korea Zinc, also known as circular-shareholding, in which ownership flows down from Korea Zinc to Sun Metal Holdings, to Sun Metal Corporation, to Young Poong and back to itself.

Korea Zinc claimed Young Poong cannot exercise its voting rights over Korea Zinc, citing the Commercial Act which stipulates that companies linked by ownership stakes of 10 percent or more cannot cast votes on each other, and partially limiting the MBK-Young Poong coalition's voting rights.

Though MBK-Young Poong refuted the claim, Park, who chaired the Thursday meeting, proceeded with it.

With the hands of MBK-Young Poong tied, Choi defended his management control. Key notions such as the adoption of a cumulative voting system and setting a 19-person cap on the number of directors on the board were approved at the meeting.