Korea Zinc Chairman Choi Yun-beom speaks during a press conference at the Korea Chamber of Commerce and Industry in central Seoul, Wednesday. Yonhap

Korea Zinc withdrew its plan for a large-scale capital increase through the issuance of new shares on Wednesday. This came a week after the Financial Supervisory Service (FSS) suspended the plan, citing concerns that it could cause significant misunderstanding among investors.

During a press conference, Korea Zinc Chairman Choi Yun-beom publicly apologized for causing confusion with the firm's rights issue decision. He also vowed to step down from the position of board chairman and hand over the role to an outside director in order to strengthen the independence of the board of directors.

"I sincerely apologize for the market confusion and the concerns raised by shareholders and investors during the process of pursuing the capital increase," Choi said.

"The intention was to strengthen a diverse and independent shareholder base centered around general investors, but in the urgent and desperate situation, I failed to fully consider the feelings of existing shareholders in advance."

Although Choi vowed to step down from the position of board chairman, he did not mention any specifics regarding his status as an inside director.

On Oct. 30, the world's largest zinc smelter announced the decision to issue 3,732,650 shares, equivalent to about 18 percent of its outstanding shares, at about 670,000 won apiece to boost voting shares.

The plan was part of the firm's stepped-up efforts to fend off a takeover attempt by the alliance between private equity firm MBK Partners and Young Poong.

According to the firm's original plan, the subscription was scheduled for Dec. 3 and 4, with the new shares expected to be listed on Dec. 18. The fundraising target was set at 2.5 trillion won ($1.8 billion), of which 2.3 trillion won was intended to be used for debt repayment.

If the move had succeeded, Choi's side would have secured approximately 3 to 4 percent of friendly shares.

However, strong criticism arose following this decision. The backlash stemmed from the perception that the zinc smelter's sudden announcement of the capital increase was contradictory, especially as it came right after the company had vowed to enhance shareholder value by conducting a tender offer to buy back treasury shares at 890,000 won per share amid the ongoing management dispute.

Korea Zinc had concluded its share buyback to counter the MBK alliance on Oct. 23 and announced the capital increase decision only a week later.

The primary criticism centered around the notion that the zinc smelter conducted the share buyback through the borrowed funds to secure a majority stake in the management dispute, only to then expect shareholders to cover the debt.

Additionally, the smelter faced inspections by the financial watchdog, which judged that there was a potential for unfair trading in relation to the suddenly announced capital increase.

Hahm Yong-il, senior deputy governor of the Financial Supervisory Service (FSS), speaks during a media briefing at FSS headquarters in Seoul, Oct. 31. Yonhap

FSS Senior Deputy Gov. Hahm Yong-il said during a media briefing on Oct. 31, "If Korea Zinc's board of directors was aware of the plan to repurchase and retire treasury shares through borrowing, followed by repayment through a capital increase, and sequentially proceeded with these steps, it suggests that critical information was omitted from the original tender offer report, indicating significant potential for unfair trading."

On Nov. 6, the FSS rejected the firm's securities registration statement and demanded corrections.

With the firm's capital increase plan for defending its management control having fallen through, the winner of the ownership fight may be decided through a proxy battle during the extraordinary shareholders' meeting expected to take place at the end of the year.

The MBK alliance has widened the ownership gap further by acquiring an additional 1.36 percent of Korea Zinc shares through on-market purchases after its tender offer concluded, extending the lead over Choi's side by more than 5 percentage points.

Currently, the MBK alliance holds a 39.83 percent stake in Korea Zinc, while Choi, his family and allies are estimated to hold around 34.65 percent.

Meanwhile, the FSS said its inspections into the zinc smelter will continue despite the company's decision to withdraw the capital increase plan.