[Invest&Law] MBK, the Eye of the Legal Storm

MBK Partners Faces Legal Scrutiny Amid Korea Zinc Management Dispute
and Homeplus Rehabilitation Filing
Authorities Intensify Investigations into MBK,
Citing Potential Harm to Small Businesses and Investors

MBK Partners (MBK), Asia's largest private equity (PE) firm managing assets worth $30 billion (approximately 43.5 trillion KRW) and leading numerous corporate acquisitions and sales, has emerged as a focal point not only in the financial and business sectors but also in the legal arena. Following the management rights dispute with Korea Zinc escalating into a court battle, the so-called 'Homeplus incident' has quickly become a hot topic in the legal community.

The management rights dispute with Korea Zinc, conducted in alliance with Youngpoong, has moved into the courtroom. During the dispute, both sides filed complaints with financial authorities and engaged in a series of lawsuits and counterclaims. In December 2024, Korea Zinc filed a complaint with the Financial Supervisory Service (FSS), alleging that MBK violated a confidentiality agreement by using undisclosed consulting materials, which were originally received for new investment review purposes, in the management rights dispute. The core of the allegation is that Korea Zinc handed over undisclosed consulting information related to new businesses such as secondary batteries, eco-friendly, and recycling projects to MBK Partners Special Situations (SS), and MBK subsequently used this information for a hostile M&A.

Korea Zinc also filed an injunction with the court requesting MBK and Youngpoong alliance to halt the tender offer for its shares, and during the hearing, filed a complaint alleging fraudulent unfair trading by purchasing Korea Zinc shares at a low price. Although financial authorities did not initiate an investigation into these cases, they have forwarded some allegations requiring further investigation related to MBK and Youngpoong to the prosecution.

Currently, ongoing main lawsuits in court include MBK and Youngpoong alliance's lawsuit against Korea Zinc for invalidating new share issuance and a shareholder derivative suit. Among the pending cases is an injunction to suspend the effectiveness of an extraordinary general meeting (EGM) filed by MBK and Youngpoong alliance. On March 7, the Seoul Central District Court suspended the effectiveness of certain agenda items passed at Korea Zinc's EGM held in January, including the setting of a 19-member cap on the board of directors excluding cumulative voting and the appointment of seven directors. Korea Zinc has appealed this decision. The agenda items discussed at the EGM are also scheduled to be presented at the regular shareholders' meeting on March 28. Depending on the outcome of the regular meeting, the legal battle may intensify.

Homeplus filed for corporate rehabilitation proceedings at the Seoul Bankruptcy Court on the 4th. The court decided to commence rehabilitation proceedings just 11 hours after the filing. MBK is the largest shareholder of Homeplus. The fact that Homeplus, which was in such poor financial condition that it had to file for rehabilitation, issued short-term bonds right before the filing has increased calls for MBK's accountability.

On the 13th, the Financial Supervisory Service (FSS) launched an on-site inspection of ShinYoung Securities, the securities firm that underwrote the commercial paper (CP), as well as Korea Credit Rating and Korea Investors Service, to verify suspicions and facts related to Homeplus's rehabilitation filing. The key points of the FSS investigation are whether MBK and the securities firms were aware in advance that the credit rating would be downgraded when selling promissory notes and bonds, and whether they had planned the rehabilitation filing in advance.

On February 28, Korea Credit Rating downgraded Homeplus's commercial paper and short-term bond credit ratings from A3 to A3-. The credit rating agency first notified Homeplus of the planned downgrade on February 25, and Homeplus requested a review the following day, February 26. On the day it was notified of the planned downgrade, February 25, Homeplus issued ABSTB. Homeplus claims that "the ABSTB issuance was approved and contracted on the 24th, so there is no problem," but ShinYoung Securities, which sold the ABSTB, has threatened criminal charges, alleging that Homeplus offloaded bad bonds. There is a possibility that the FSS investigation will expand into a special audit covering as far back as the 2015 acquisition of Homeplus.

MBK is also under the National Tax Service's (NTS) tax audit. The Seoul Regional Tax Office's Investigation Division 4 has launched a special tax audit on MBK. The NTS is reportedly investigating various transactions related to MBK's mergers, acquisitions, and sales, examining the overall flow of funds.

Authorities such as the NTS and FSS reportedly maintained a restrained stance toward MBK until the management rights dispute with Korea Zinc was resolved. However, as the Homeplus incident is expected to cause damage to small business owners and individual investors, the mood has shifted to "this cannot be left as is." A lawyer from a major law firm said, "The authorities were planning to address everything at once after the management rights dispute was settled, but the Homeplus incident made that impossible."

Lim Hyun-kyung & Han Su-hyun, Legal Times reporters

※This article is based on content supplied by Law Times.

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