The South Korean Court has rejected a bid by MBK Partners, and YoungPoong to stop the planned new shares issuance of Korea Zinc.
According to Korea Zinc’s spokesperson, the company wants to sell these shares in order to raise money for an $8.4 billion US smelter.
Korea Zinc’s shares rose up to 5% after the decision, which should give the project the green light.
Reuters reported that YoungPoong’s shares fell by as much as 10%.
Korea Zinc announced plans to invest a significant amount of money in the United States. It will build a critical minerals refinery, which is a large-scale facility, in Tennessee.
The estimated cost for this ambitious project is $7,4 billion. It will be funded largely by the US Government.
Investments in critical US minerals target
This new refinery’s primary objective is to reduce America’s dependency on China in the provision of essential materials.
The materials used in these industries are essential components for a wide range of industries today, such as the production of sophisticated electronic devices, advanced semiconductors, and vital defense and weapon systems.
The US is aiming to protect key industries from potential geopolitical risks and supply disruptions by establishing an internal, safe supply chain. This marks a major step towards onshoring vital industrial capacity.
The investment is a reflection of a trend in the West to diversify and derisk their supply chain away from one dominant supplier.
Korea Zinc will sell a 10% share of its shares valued at $1.9billion to a joint-venture.
The US government controls this joint venture, which includes investors from America.
MBK Partners, a firm of private equity, and YoungPoong conglomerate, who collectively own approximately 46% in Korea Zinc have expressed disappointment over the ruling.
The investors expressed their concerns about a possible loss of value for shareholders and equity in the conditions of investment.
In a joint statement, both companies stated:
Despite the outcome of the US smelter, YoungPoong, MBK Partners, and Korea Zinc intend to continue supporting the project in order for it to deliver genuine win-win results.
The issue of shares as a tactic to control corporate power
Governance experts believe that the US smelter agreement is a significant benefit to Korea Zinc chairman Yun B. Choi. Choi is engaged in a struggle for control with MBK, YoungPoong and a host of other companies, a fight which began last October.
The company can shift power to Choi by issuing shares.
Korea Zinc sees its US Smelter Project as strategic because it supports Washington’s initiative to diversify the mineral supply chain while simultaneously accomplishing the company’s goal of establishing growth through an early entry into America, the most important critical minerals market in the world.
As of 0403 GMT the shares in Korea Zinc rose 0.4%, while YoungPoong was down 9.0%. This contrasts with a rise of 0.1% in KOSPI.
The post Major shareholders fail in their attempt to stop Korea Zinc from selling shares for US smelter could be updated as new developments unfold.
