Korea Zinc shares surge ahead of $1.7 bln offer deadline as battle for control heats up
Korea Zinc shares jump to record high before offer closes
Private equity firm MBK, Young Poong tender topped by Korea Zinc buyback offer
Battle for No.1 zinc maker in focus amid supply chain concerns, US-China trade tensions
Recasts, writes through
By Heekyong Yang and Joyce Lee
SEOUL, Oct 4 (Reuters) -Shares in Korea Zinc 010130.KS, the world's biggest refined zinc producer, surged on Friday, the last trading day before a deadline to accept a $1.7 billion tender offer from its biggest shareholder Young Poong and private equity firm MBK Partners.
Run by the Choi family, Korea Zinc has been in a bitter battle for control of the $12 billion zinc empire with the co-founding Chang family, whose electronics conglomerate Young Poong 000670.KS made the joint offer with MBK in September.
Each side in combination with their likely supporters holds about a one-third stake in Korea Zinc, according to calculations by Meritz Securities, though the groups have declined to comment.
Both have made tenders to minority investors to gain control, with Korea Zinc on Wednesday announcing a higher offer than the one from Young Poong and MBK.
The fight has gained global attention because Korea Zinc supplies raw materials for a slew of cutting-edge industries such as semiconductors and electric vehicle batteries, as concerns over securing supply chain control mount amid heightened U.S.-China trade tensions.
Korea Zinc shares rose as much as 8.6% to a record high of 774,000 won on Friday. They were up 6.2% at 758,000 as of 0238 GMT, above the tender offer price of 750,000 won per share. The wider market .KS11 was 0.8% higher. The results of the offer will be announced on Oct. 10 in a regulatory filing, MBK said.
Korea Zinc's rival offer is to buy back about 2.7 trillion won ($2.02 billion) of shares alongside Bain Capital, which offered to buy another 430 billion won of shares, at a maximum price of 830,000 won per share. That offer closes on Oct. 23.
Korea Zinc, whose customers include metals traders Glencore GLEN.L, Trafigura and Sumitomo 8053.T, said on Friday in a regulatory filing that it would buy shares even if the amount fell short of its targeted stake of up to 18%.
Young Poong has said its offer was aimed at participating in Korea Zinc's management and improving its governance.
CORE NATIONAL TECHNOLOGY
The battle for control comes at a crucial time for South Korea, which is trying to implement corporate governance reforms to give a boost to its capital markets that have long been stymied by the influence exerted by its sprawling conglomerates.
Minority shareholders, who owned about 27% of Korea Zinc as of end-June according to a company filing, will play a crucial role in determining the outcome of the takeover battle. South Korea's National Pension Service, a long-term investor that holds a separate 7%, did not respond to a request for comment on its plans.
Korea Zinc last month asked the South Korean government to designate its battery component technology as a national core technology that would require government approval for a foreign acquisition to proceed. South Korea's industry ministry is set to hold a meeting later on Friday.
The United States and its allies are seeking to reduce reliance on China for critical metals.
"There are concerns that this takeover by a venture capital firm may be a precursor to an on-sale to majority Chinese interests," said Ian Satchwell, an adjunct professor at the University of Queensland's Sustainable Minerals Institute.
MBK and Young Poong said last month they had no plans to sell Korea Zinc to China.
A joint venture set up by Korea Zinc and LG Chem 051910.KS in South Korea is set to produce precursors, a key EV battery material. Precursors produced by the joint venture will be used in LG Chem's cathode plant in the U.S. that is slated to start mass production in 2026 to supply EV battery cathodes to General Motors GM.N.
($1 = 1,333.7000 won)
Reporting by Joyce Lee, Jihoon Lee and Heekyong Yang; Editing by Ed Davies and Jamie Freed
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