By Joyce Lee
SEOUL (Reuters) – Shareholders in Korea Zinc elected board members nominated by current management at a special stakeholder meeting on Thursday, escalating a bitter four-month takeover battle for the world’s biggest refined zinc producer.
The vote excluded rival and major shareholder Young Poong after Korea Zinc management said it did not have voting rights, drawing condemnation from representatives of Young Poong and its takeover partner, private equity firm MBK Partners.
Young Poong and MBK have been attempting to wrest control from Korea Zinc’s current management, led by Chairman Yun B. Choi, since September and have amassed a combined 40.97% stake in the company, according to a December regulatory filing.
Korea Zinc’s Choi and a group friendly to him hold about 34% of the company, according to local media.
In a move to control the board, Young Poong and MBK had proposed 14 new candidates, while Korea Zinc’s management had nominated seven.
Before the meeting, the company had 13 board members, with one having resigned. Of the remaining 12, only one sided with Young Poong, with the rest backing current management.
Korea Zinc shareholders voted in all seven candidates nominated by Korea Zinc’s management, and approved a proposal limiting the board size to 19 members, thwarting Young Poong and MBK’s bid to secure a majority seat and allowing Choi to retain control.
‘GROSSLY UNJUST DECISION’
During the meeting, Korea Zinc management said Young Poong’s shares would be excluded from voting. Young Poong had a 25.42% stake in Korea Zinc as of a December filing.
The reason given was that entities related to Korea Zinc sold a stake larger than 10% in Young Poong to Korea Zinc’s Australian unit Sun Metals Corp (SMC) according to a filing on Wednesday, creating a cross shareholding structure.
Korea Zinc said in an emailed statement that according to South Korea’s Commercial Act, because a Korea Zinc subsidiary has more than a 10% stake in Young Poong, Young Poong’s stake in Korea Zinc does not have voting rights.
MBK said in its own statement the Commercial Act provision only applied to domestic companies and not to SMC.
“This is a grossly unjust decision,” said a lawyer representing Young Poong and MBK in the shareholders’ meeting.
“We will hold you responsible for an invalid shareholders’ meeting,” the lawyer said. Another Young Poong and MBK representative said without elaborating that they would seek legal recourse.
The outcome of Korea Zinc’s move was not immediately clear.
The takeover battle has pitted members of Korea Zinc’s two founding families against each other.
Choi, a grandson of the company’s co-founder, had taken a series of steps to try to thwart the takeover bid including promising to give its board more independence by making way for an outsider to become its chair, as well as underscoring Korea Zinc’s role in the global supply chain for materials outside China.
MBK and Young Poong have said Korea Zinc’s current board of directors do not take into account shareholders’ interests, and vowed to improve governance at the zinc refiner.
(Reporting by Joyce Lee; Editing by Saad Sayeedd, Tom Hogue and Emelia Sithole-Matarise)
