(Bloomberg) — Korea Zinc Co. shares jumped to a record on speculation private equity firm MBK Partners will raise its offer to gain control of the world’s biggest refiner of the metal.
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MBK teamed up with Young Poong Corp., Korea Zinc’s largest shareholder, to launch an offer last week. The bid came as two branches of the founding family of the metal producer are locked in a dispute over the management of the business founded more than 50 years ago. The deal is also attracting political opposition.
Korea Zinc jumped as much as 8.1% to a record on Thursday, following a surge of almost 20% last Friday after MBK made the offer. Korean markets were closed for the first three days of the week due to public holidays. The company’s shares closed at 707,000 won, valuing it at 14.7 trillion won ($11.1 billion), above the offer that values it at 13.7 trillion won.
“We can’t rule out the possibility of a further hike in offer price if the stock continues to rally,” Park Seong-bong, an analyst at Hana Securities Co., said in a note on Thursday. The volatility in the stock is expected to rise further, depending on factors, including the possibility of a tender offer price hike and Chairman Choi’s response, he said.
Young Poong, along with one of the branches of founding family, own about 33.1% of Korea Zinc. MBK is seeking anywhere from 6.98% to 14.6% of the company.
Kim Kwang Il, a partner of MBK, said in a press conference on Thursday that even if it only got about 7% of Korea Zinc that would still be enough to influence the company.
“If we can acquire an additional 7% stake, we should be able to have a say in the company that would take it to the direction we wanted,” he said.
Korea Zinc is led by Chairman Choi Yun-beom, the late founder’s grandson, and his expensive push into battery metals and renewable energy has became a flash point with the other branch of family. Choi has said his new growth strategy will ensure Korea Zinc’s sustainability, as it currently relies heavily on the carbon-intensive smelting business.
MBK, North Asia’s biggest private equity firm with $30 billion under management, said it wants to improve Korea Zinc’s deteriorating financial profile and corporate governance. Korea Zinc opposes MBK’s offer and said the buyout firm may resell to foreign buyers and undermining South Korea’s industrial competitiveness.
Opposition Democratic Party lawmaker Park Hee-seung has expressed concerns over MBK’s offer, and said he plans to raise the issue during an annual parliamentary audit. Kim Doo-gyeom, mayor of Ulsan, where Korea Zinc operates its smelter, also slammed the proposed takeover, saying it could hurt the city’s industrial competitiveness and growth.
But Kim said MBK has no plans to de-list or sell the firm to foreign interests. “We’re in this for the long term,” he said.
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