Last Day of Yeongpung·MBK Tender Offer... Investors 'Subscribe vs Wait'

Subscription Shares Must Exceed 'Minimum' to Succeed in Tender Offer
Korea Zinc's Treasury Stock Purchase Price of 830,000 Won Offers Price Merit
Additional Injunctions May Cause Treasury Stock Purchase Disruptions
Investors May Participate in Last-Minute Subscription to Secure Returns

As Korea Zinc launches a counterattack with a 3 trillion won tender offer for its own shares, investors are caught in a dilemma over which tender offer to participate in. Korea Zinc's tender offer price is set at 830,000 won, which is relatively favorable in terms of price. However, Yeongpung and MBK Partners have filed injunction lawsuits against Korea Zinc's share buyback, creating uncertainty about whether the buyback will proceed as planned. There are concerns that if the injunctions filed again by Yeongpung and MBK are upheld, the share buyback could be rendered futile.

[Image source=Yonhap News]

Tender Offer Success Threshold: 1.44 Million Shares

The tender offer initiated by Yeongpung and MBK to acquire additional shares of Korea Zinc will close today (the 4th). Yeongpung and MBK announced that from the 13th of last month until today, they would purchase between 1.44 million and 3.02 million shares of Korea Zinc at 750,000 won per share. Considering that tender offer subscription volumes typically surge on the last day, it is still uncertain whether the tender offer will succeed.

During the tender offer period, Yeongpung and MBK reportedly inquired with financial authorities whether they could purchase the subscribed shares even if the subscription volume slightly fell short of the minimum threshold (1.44 million shares). This demonstrated their intention to secure as many Korea Zinc shares as possible. However, the authorities issued a ruling that the minimum volume must be purchased, meaning that at least 1.44 million shares must be subscribed for the tender offer to succeed.

Meanwhile, Korea Zinc raised its own share tender offer price to 830,000 won, offering investors a higher return. This is 80,000 won more per share than Yeongpung and MBK's offer of 750,000 won. Korea Zinc's share buyback will proceed from today until the 23rd, within a range of 1.21 million to 3.27 million shares. From the perspective of investors holding Korea Zinc shares, this represents a more attractive price proposal.

Korea Zinc's counter tender offer appears to be a measure to block Yeongpung and MBK from acquiring additional shares. An investment banking (IB) industry insider explained, "Korea Zinc plans to cancel all repurchased shares, so even if the tender offer succeeds, the acquired shares cannot be used for voting rights," adding, "By offering a higher purchase price, they aim to deter investors from subscribing to Yeongpung and MBK's tender offer."

Additional Injunctions Add Variables... Uncertainty Over Share Buyback

There is also analysis that major institutional investors holding Korea Zinc shares may participate in Yeongpung and MBK's tender offer to secure returns, due to anxiety that Korea Zinc's share buyback may not proceed as planned amid various lawsuits filed by Yeongpung and MBK in response to Korea Zinc's tender offer.

Chairman Choi Yoon-beom of Korea Zinc entering the press conference hall [Photo by Yonhap News]

On the 2nd, Yeongpung and MBK filed an injunction at the Seoul Central District Court to suspend the share buyback tender offer process. They also filed criminal complaints against directors who supported the share buyback tender offer. If the injunction on the share buyback is upheld or legal issues arise before Korea Zinc's tender offer closing date on the 23rd, Korea Zinc's share buyback plan could face significant setbacks.

An asset management official said, "Institutional investors generally prefer certain returns over high expected returns with high uncertainty," and added, "We will have to wait for the subscription results to know which tender offer investors will participate in."

Another official explained, "Individual investors with small holdings can sell on the market to lock in returns if the stock price is higher than Yeongpung and MBK's tender offer price," but added, "Large institutional investors find it difficult to sell on the market due to concerns about price drops caused by large sell-offs."

The legal battle over the injunction on the share buyback is intensifying. MBK emphasizes that the previously dismissed injunction and the newly submitted injunction are separate cases, while Korea Zinc dismisses the injunction filed again by Yeongpung and MBK as containing issues that were all dismissed in the previous injunction.

In a press release the day before, Yeongpung and MBK stressed that the first injunction filed on the 13th of last month was about whether Yeongpung and MBK are "special related parties" of Korea Zinc, whereas the additional injunction filed on the 2nd aims to suspend the tender offer due to alleged "breach of fiduciary duty and illegality," highlighting that these are injunctions of different natures.

They also explained that excluding discretionary reserves from distributable profits, the share buyback limit that can be approved solely by the board of directors is only 58.6 billion won, and this issue is included in the injunction. They warned that if the injunction is upheld, the share buyback volume could be reduced to 58.6 billion won. In response, Korea Zinc claims that the share buyback limit is equivalent to 6 trillion won and that the buyback can proceed with only board approval without a shareholders' meeting.

An industry insider predicted, "Institutional investors will also conduct their own legal assessments of Korea Zinc's share buyback and decide which tender offer to participate in."

This content was produced with the assistance of AI translation services.