MBK Partners' plan to sell Golfzon County, a golf course operator and reservation platform, has sparked a dispute with second-largest shareholder Golfzon Holdings, which is challenging MBK's right to sell the business.
On Tuesday, MBK signed a share purchase agreement with a consortium of The Sienna Group and Ciel Asset Management to sell its controlling stake in Golfzon County, valuing the company at about 1.8 trillion won ($1.35 billion). But the deal would also involve Golfzon selling its own stake.
MBK is the largest shareholder of Golfzon County, holding a 68.4 percent stake through a special purpose company, while Golfzon Holdings owns the remaining 31.6 percent.
IPO dispute
MBK claimed that it has the right to exercise a drag-along clause in the event of a failed initial public offering, meaning it can compel Golfzon Holdings to sell its shares alongside its own stake.
MBK said Golfzon Holdings had agreed to the drag-along clause and signed the 2018 investment agreement containing the provision.
"The protection of Golfzon Holdings' management control was conditional on a successful IPO," MBK said, adding that Golfzon Holdings knew its control over the company could not be assured in the event of a failed listing.
An IPO was not a viable option under current market conditions, MBK said, referring to Golfzon Holdings's status as a Kosdaq-listed company.
Golfzon Holdings claimed MBK did not notify it of the details of the share purchase agreement or its intention to exercise the drag-along rights. It also said it had agreed to the investment on the understanding to pursue an IPO of Golfzon County.
MBK said it had given Golfzon Holdings a right of first offer to acquire Golfzon County before launching an official sale process, but the holding company did not submit a concrete proposal.
MBK said the right was a right of first offer, rather than a right of first refusal, meaning it was not obligated to accept Golfzon Holdings' proposal and could pursue a deal with the bidder offering the most favorable terms.
Golfzon Holdings later offered to buy MBK's stake near the end of the bidding process. MBK said its offer was "distinctly inferior" to the Sienna consortium's in valuation and deal structure.
A rent rift
The dispute also involves leases for four golf courses owned by Golfzon County Asset Management, a Golfzon Holdings subsidiary: Anseong H and W, Seonun and Cheongtong.
Golfzon Holdings said it had leased four of its golf courses to Golfzon County at below-market rents, without requiring separate rental deposits, to support the subsidiary’s growth and IPO plans.
The leases allowed Golfzon County to operate the courses at below-market rents without security deposits, according to Golfzon Holdings.
Though Golfzon County Asset Management sought rent adjustments citing higher interest rates and operating costs, it received no response from MBK for seven years, it added.
"The contract has no separate security deposit, and the rent is also significantly below market levels," Golfzon Holdings said.
MBK said the leases were "lawfully executed through mutual business judgment and formal consent in 2018" as part of the initial investment. It said it would hold Golfzon Holdings accountable for "baseless misrepresentations, market disruption and contractual breaches."
ch0221@heraldcorp.com
