Bitter family feud plays out in South Korea for control of metals empire

SEOUL – The battle for control of the world’s largest zinc refiner between its two founding families faces a critical deadline that could mark the beginning of the end of a multibillion-dollar feud.

The power struggle over Korea Zinc – founded by two friends who fled North Korea, and is still held by the Choi and the Chang families – has captured headlines.

Shareholders have until the end of Oct 14 to decide whether to accept a twice-sweetened 830,000 won-per-share takeover offer from a consortium made up of its biggest shareholder – the Chang family’s Young Poong Corp – and MBK Partners, one of North Asia’s biggest private equity firms. The two said last week there would be no further price increases.

On paper, that leaves a rival offer ahead – a buyback launched by chairman Choi Yun-beom. His 890,000 won-a-piece gambit, supported by buyout firm Bain Capital, is over 7 per cent higher, valuing the company at 18.4 trillion won (S$17.8 billion). Yet the stock has traded well short of that level, indicating continued scepticism among investors.

The endgame here will have ripple effects far beyond South Korea. The company controls about 12 per cent of the refined zinc output outside of China, making it a key player in efforts to diversify the supply of energy-transition metals. Zinc is used to galvanise steel and as a coating to prevent rust on solar panels and wind turbines. It is also an alternative to lithium for batteries.

And while bitter public disputes among family-controlled conglomerates, or chaebols, are a recurring phenomenon in South Korea and are the subject of popular TV dramas, few involve major private equity firms.

“MBK is going after these family-controlled companies that are exposed to the risk of management fight, which is keeping them on their toes,” said Mr Park Ju-gun, head of corporate research firm Leaders Index in Seoul.

“It’s a zero-sum game, but Choi is clearly more desperate because his defeat would mean the end of everything for him.”

The saga revolves around disagreements over the direction of the company and the role it can play in the global energy transition, which have left Mr Choi, the grandson of one of the founders, and Young Poong, controlled by the rival faction, at loggerheads.

A long-simmering dispute, the founding families’ fight spilled into the open in September with the MBK-backed bid.

Timed right before the South Korean Thanksgiving holiday, it was intended to catch the Choi family by surprise. Retaliatory offers followed, pushing the stock to successive records.

The South Korean financial watchdog intervened last week, calling the fight “overheated” and threatening to punish anyone engaging in unfair trade practices to influence the stock price.

MBK, founded by a US-educated former banker and Carlyle Group dealmaker, billionaire Michael Kim ByungJu, has said it wants to improve the corporate governance of Korea Zinc. 

For over seven decades, the Chois and the Changs quietly built their holding company Young Poong into a massive conglomerate. But their differences grew when Mr Choi, 49, became chairman in 2022, and announced plans to stake the company’s future on the green transition.

Mr Choi wants to diversify Korea Zinc away from its decades-old non-ferrous metals refining business, by investing in the green economy, while the rival faction is keen for it to maintain strong dividends.

To fulfil his goal, Mr Choi struck a series of agreements with South Korean conglomerates, including Hyundai Motor Group, units of Hanwha Group, LG Chem and commodities trader Trafigura Group, issuing new shares and raising funds.

The Chang family saw Mr Choi’s attempt as a way to increase his influence by bringing in “friendly” investors and roped in MBK. BLOOMBERG