Korea Zinc’s Stock Price Plunges Below Tender Offer: Choi’s Blazing Trail Leaves MBK Smiling

Although MBK Partners and Youngpoong suddenly raised the tender offer price for Korea Zinc on the 26th, unlike before, Korea Zinc’s stock price fell below the tender offer price on the day of the announcement. Analysis in the market that this reflects the perception that the Chairman of Korea Zinc, Choi Yoon-beom, will find it difficult to formulate a response plan in a short period of time.

Although Chairman Choi and Korea Zinc strongly criticized the increase in the tender offer price of MBK Partners and Youngpoong on this day, they are said to be considering counter-attack cards as a tender counter offer.

According to the Korea Exchange on the 26th, the stock price of Korea Zinc closed at 713,000 won, up 1.28% from the previous day. The stock price of Youngpoong Precision, which owns a 1.85% stake in Korea Zinc, closed at 24,950, up 9.67%. Both stocks fell below the tender offer price adjusted upwards by MBK and Youngpoong. If the stock price falls below the tender offer price, the probability of the tender offer being successful increases.

MBK and Youngpoong submitted a correction report to the Financial Supervisory Service on this day to increase the tender offer price of Korea Zinc from 660,000 won per share to 750,000 won per share. Investors were offered an additional premium of 13.6% on top of the previous premium price. The size of the scheduled tender offer is the same, with a minimum of 1,445,036 shares (approximately 7%) and a maximum of 3,024,881 shares (approximately 14.6%).

In addition, MBK raised the tender offer price for Youngpoong Precision, which it maintains independently, by 25% from 20,000 won per share to 25,000 won per share.

On the 13th, when the tender offer started in the securities market, Korea Zinc and Youngpoong Precision were above the tender offer price, but the stock price formed below, which is analyzed to reflect Chairman Choi’s cautious opinion on counterattack.

If Chairman Choi’s counterattack does not meet expectations, investor sentiment may shift towards a response to the tender offer. If you buy at a prematurely high price, there is a possibility of loss.

Neither MBK nor Youngpoong will purchase all the shares applied for if the number of shares subscribed by Korea Zinc is less than the expected minimum purchase. If the maximum purchase amount is exceeded, purchases will be made in proportion to the maximum purchase amount.

MBK is confident that since most of the other shareholders are institutional investors, there is a high possibility of participating in this tender offer, which can clearly realize a profit. Specifically, in the case of Korea Zinc, the rising tender offer price of 750,000 won is 11.6% higher than the record high of 672,000 won since listing.

MBK explained, “Over 6 trading days from the 13th to the 25th, more than 60% of Korea Zinc stock purchases were made by individuals, so conservative institutional investors did not show active purchases above the initial tender offer price.”

In the investment banking (IB) industry, there is an assessment that MBK put strong pressure on Chairman Choi by raising the tender offer price at the last minute, reducing the time to counterattack and adding to the financing burden. The 26th is the last day that price adjustments can be made without extending the trading day of the tender offer. Excluding holidays, etc., the end of the tender offer is only 5 business days until October 4th. At the latest, a plan must be prepared to block MBK and Youngpoong’s tender offer by the 2nd of next month.

It is known that Chairman Choi is currently considering a counter-tender offer with domestic and foreign organizations. In the meantime, we have been mobilizing all our business contacts to find a breakthrough. In particular, attention is paid to what kind of support measures the Hanwha Group, which is classified as a friendly force, can actually think of. In the IB industry, the possibility of support from Hanwha Group Vice Chairman Kim Dong-gwan, who is known to be close to Chairman Choi, is also being discussed.

Since the direct involvement of Hanwha affiliates could lead to issues such as breach of trust, the personal support of Vice Chairman Kim is discussed. Vice Chairman Kim is said to be discussing various support measures, including a plan to review ways to help financial investors invest more stably. An official of the Hanwha Group said, “We are not considering anything at all (regarding measures to support Chairman Choi).

Meanwhile, on this day, Korea Zinc strongly criticized MBK Partners for raising the tender offer price. Before raising the tender offer price, on the 25th, special purpose company MBK (SPC) Korea Enterprise Investment Holdings disputed the fact that it had borrowed 300 billion won by Youngpoong.

Korea Zinc said in a statement that day, “The increase in the tender offer price is clear evidence that there is no intention to protect the national key industry,” and “MBK and Youngpoong are conducting hostile M&A against Korea Zinc and paying short term loans 8-month debt After raising 1.4905 trillion won, they are increasing the level of their hostile offensive against Korea Zinc by raising another 300 billion won in debt. “The debt alone is a whopping 1.8 trillion won,” he noted.