Korea Zinc has decided to withdraw its plan for a rights offering, reversing its decision just one week after the Financial Supervisory Service put a stop to it. Chairman Choi Yoon-bum announced his resignation from the position of Chairman of the Board but will retain his role as an internal director. The market sees this as a strategic move to create a pretext for improving corporate governance.
On November 13, Korea Zinc convened an emergency board meeting and decided to withdraw the rights offering plan. The company explained that it has been listening to the concerns of shareholders and market participants, which were not anticipated at the time of the initial resolution on October 30.
Previously, the Financial Supervisory Service requested a correction to the securities report, stating that the rights offering plan might cause significant misunderstanding among investors. Korea Zinc had announced a plan to issue new common shares, amounting to 20% of its total issued shares post-treasury stock cancellation, at 670,000 won per share through a public offering.
Although Korea Zinc revealed that most of the funds from the rights offering would be used to repay debts, the market interpreted this as a maneuver by Chairman Choi to secure 3-4% more friendly shares, which faced heavy criticism. This is because the sudden announcement of the rights offering contradicted the company’s previous open market purchase of its own shares to increase shareholder value. Shareholders particularly criticized the company for borrowing money to gain a shareholding advantage in a management dispute, which would ultimately have to be reimbursed by the shareholders.
In response to regulatory intervention, Korea Zinc abandoned the rights offering plan. Chairman Choi, during a press conference, promised to strengthen board independence and protect minority shareholders by separating the roles of Chairman of the Board and CEO and appointing an independent outside director as board chair.
Market observers see Chairman Choi’s announcement as a strategy to undermine the justification presented by the Yeongpoong-MBK alliance, which has been advocating for corporate governance reforms as part of their tender offer for Korea Zinc shares. The Yeongpoong-MBK alliance has emphasized corporate governance and shareholder value as their reasons for pursuing acquisition.
The management dispute is expected to culminate in a proxy battle at an extraordinary shareholders’ meeting anticipated by year’s end. Currently, the Yeongpoong-MBK alliance holds 39.83% of Korea Zinc, while Chairman Choi’s side holds approximately 34.65%, following additional share purchases on the open market.
Korea Zinc aims to persuade shareholders at the upcoming meeting by promoting the company’s long-term competitiveness and vision over short-term investment returns. Chairman Choi stated that he trusts in the rational choices of shareholders who support the long-term growth and development of the company.
Meanwhile, despite the withdrawal of the rights offering, the Financial Supervisory Service has stated it will continue its investigation into Korea Zinc’s actions.