Prolonged dispute over control of Korea Zinc turns into game of chicken at cost of industrial competitiveness
The fight for management control over Korea Zinc has been long, nasty and expensive -- more so than any party to the dispute could have imagined.
Korea Zinc has been quietly expanding its market presence as a hidden champion -- the world's No. 1 non-ferrous metal smelting company, producing the largest quantities of four metals: zinc, lead, silver and indium. It also makes several rare metals, including antimony, indium, tellurium and cadmium, which are considered critical minerals.
If not for the takeover attempt by its largest shareholder and estranged business partner, Young Poong, Korea Zinc would be thriving amid the unprecedented need for stable supply chains of key minerals, as the trade war between the United States and China has escalated into export controls on rare minerals.
Instead, Korea Zinc’s management and its proxy fight rival -- the alliance of Young Poong and MBK Partners -- have made headlines almost daily for their tit-for-tat litigation and the smelter’s share price that at one point had quadrupled due to aggressive buybacks in the last four months.
What Korea Zinc and Young Poong used to justify this all-consuming battle -- improvements in shareholders’ interests and corporate governance -- is gone without a trace.
The first gesture of reconciliation came 130 days after the management dispute broke out.
Korea Zinc, after successfully defending its management control at the extraordinary shareholders' meeting on Jan. 23, extended an olive branch to the Young Poong-MBK alliance.
“Korea Zinc is (in) a national key industry and is an asset to Korea. … It is time to forget the past for a moment and find a reasonable plan for everyone,” said Park Ki-deok, president and co-CEO of Korea Zinc.
Park expressed aversion to a prolonged war of attrition. “If MBK wishes, we will also open the way for participation in management. We believe that MBK’s know-how and wisdom accumulated as the largest private equity fund in Northeast Asia will be helpful to Korea Zinc.”
Korea Zinc put forward several proposals to MBK based on the premise of compromise, showing an intention to offer director seats to MBK-backed nominees to strengthen the board's independence, checks and balances, and diversity.
When there are deep emotional and financial scars, hammering out a compromise isn’t easy.
“Dialogue and compromise are possible only when there is a minimum level of respect for the other party, but Korea Zinc Chairman Choi Yun-beom has completely ignored the majority shareholders, who account for nearly half of the ownership,” Young Poong and MBK said in a statement on Feb. 5.
With the Young Poong-MBK consortium refusing to reconcile, the two parties are expected to square off with each other in general shareholders' meetings to be held by Korea Zinc in March and beyond.
An extended dispute over management control could lead to serious repercussions. “This management dispute has no benefit and only causes disruptions in planning for future growth industries, damages corporate value, and increases debt and employee anxiety,” said Park Joo-geun, CEO of Leaders Index, a corporate tracker.
Last week, some 2,600 small and medium-sized enterprises expressed concern over abusive litigation lodged by MBK and Young Poong against Korea Zinc and called for an end to the dispute, which has hurt Korea Zinc’s partners, contractors and other related companies.
When a fight is seen as wasteful, it's wise to step away. Even if you win the contest, no one will treat you like a winner.
By Park Han-na (hnpark@heraldcorp.com)
