“Excessive tender offer competition damages shareholder value”
Strong warning against unfair practices such as ‘spreading rumors’
Lee Bok-hyeon, head of the Financial Supervisory Service, ordered the immediate launch of an unfair transaction investigation into Korea Zinc’s tender offer, which is showing signs of overheating. As the current management of Korea Zinc and the Youngpoong and MBK Partners alliance fought fiercely over Korea Zinc’s management rights, and even the market was shaken, the authorities stepped in to intervene.
According to the Financial Supervisory Service on the 8th, Director Lee emphasized at an executive meeting held that day, “If unfair trading practices are confirmed for the purpose of interfering with the other party’s tender offer, we will take strict action against anyone in accordance with laws and principles.” In particular, he strongly warned against spreading rumors and actions that could have an unfair influence on stock price formation. Director Lee said, “Excessive tender offer price competition that ignores long-term corporate value is highly likely to ultimately lead to damage to shareholder value,” and will thoroughly examine not only the tender offer process but also issues that arise thereafter for violations of related laws such as the Capital Markets Act. requested that
As the news became known that the Financial Supervisory Service had begun an investigation into unfair transactions related to Korea Zinc’s tender offer under Director Lee’s instructions, stock prices of related stocks also fell on this day. Korea Zinc’s stock price was 776,000 won, down 0.51% from the previous day, and Youngpoong Precision’s stock price also fell 2.59%, ending trading at 33,800 won.
Concerns over Korea Zinc’s stock price plummeting due to muddy fight… Consumer alert issued
Financial Supervisory Service unfair trade investigation
The conflict between Youngpoong and Korea Zinc, which have been in business together for 75 years, led to a tender offer competition when Youngpoong signed a contract with MBK Partners as the largest shareholder on the 12th of last month. Starting the very next day, Youngpoong began a tender offer for Korea Zinc at 660,000 won per share and at the same time filed an application for a provisional injunction with the Seoul Central District Court to prohibit Korea Zinc from acquiring its own shares. As Korea Zinc’s stock price, which was around 500,000 won, soared to around 700,000 won, Youngpoong raised the tender offer price to 750,000 won on the 26th, two weeks later.
As we moved into October, Korea Zinc’s response began in earnest. On the 1st, Korea Zinc Chairman Choi Yoon-beom posted a tender offer notice for Youngpoong Precision, and then held a board meeting on the 2nd and decided to acquire Korea Zinc’s treasury stocks. On the same day, the court dismissed Youngpoong’s application for a provisional injunction to prohibit the acquisition of Korea Zinc’s treasury stock. The purchase price per share suggested by Korea Zinc was 830,000 won.
In response, the Youngpoong-MBK alliance also responded. On the 4th, the deadline for the first tender offer transaction, the tender offer price was increased from 750,000 won to 830,000 won, and the company began competing under the same conditions as Korea Zinc.
The two sides are also fighting to secure a stake in Youngpoong Precision, which has emerged as a major variable in this competition as it holds a 1.85% stake in Korea Zinc, with the same tender offer price of 30,000 won. As the ‘War of Money’ to secure shares continued, both Youngpoong and Korea Zinc were burdened with having to raise trillions of dollars. There are concerns that whichever side wins the stake competition will fall into the ‘winner’s curse’ due to excessive spending.
On this day, Korea Zinc’s stock price rose 39.6% compared to the 12th of last month (556,000 won) before Youngpoong and MBK announced the tender offer. During the same period, Youngpoong Precision’s stock price also surged from 9,370 won to 33,800 won.
As concerns about damage to investors due to market overheating grew, the Financial Supervisory Service also issued a consumer warning regarding the tender offer on the 8th. An official from the Financial Supervisory Service said, “In the case of a tender offer related to a management rights dispute, if the dispute is terminated, such as an agreement between both parties, the stock price may fall sharply even during the tender offer period.” “You must check the contents before investing,” he urged.
Reporter Kim Soo-yeon [email protected]
Reporter Kim Jae-hyung [email protected]
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