Kim Kwang-il, a partner at MBK Partners, speaks during an interview with The Korea Times at the firm's office in Seoul, Jan. 14. Korea Times photo by Shim Hyun-chul

Disputes over management rights often have a negative impact on a company's image.

Private equity firm MBK Partners, currently engaged in a monthslong battle with Korea Zinc Chairman Choi Yun-beom over management control, is well aware of this.

During a recent interview with The Korea Times, Kim Kwang-il, an MBK partner overseeing the Korea Zinc deal, stated that completing the reform of the zinc smelter's board of directors will be essential to minimize such negative effects after successfully acquiring management rights.

"Ultimately, success can be defined as a scenario where the company grows, its stock price rises and both shareholders and employees are satisfied," Kim said.

"Over the past 20 years, there have been various concerns whenever we acquired companies, but in most cases, they ended with a happy ending. We are committed to ensuring that this case will follow the same path."

Kim cited the past acquisitions of Doosan Machine Tools and ING Life as examples that brought about positive outcomes.

MBK acquired Doosan Machine Tools in 2016 and sold it in 2021 to the domestic automotive parts company DN Automotive, dispelling concerns over the potential leakage of national core technologies overseas.

The private equity firm acquired ING Life in 2013 and sold it in 2018 to Shinhan Financial Group after significantly increasing its scale.

"The acquisition of a life insurance company by a private equity fund was an unprecedented move," Kim said.

"Customers typically hold insurance products for 20 to 30 years and pay premiums. At the time, there were concerns that if a private equity fund, which typically makes short-term investments, managed such a company, it might end up ruining the business. However, ING Life actually improved its performance and it became a better company."

The management rights dispute surrounding the world's largest zinc smelter began last September when Young Poong, then the largest shareholder with a 33.13 percent stake, joined hands with MBK to oust Choi from the chairmanship. On Sept. 13, the Young Poong-MBK alliance initiated a tender offer for the zinc smelting company.

In response, in October, Korea Zinc led by Choi conducted its tender offer for a treasury stock buyback at a price higher than the tender offer price proposed by MBK to counter the alliance.

Both sides engaged in a costly bidding war, raising their tender offer prices. The final tender offer price from the MBK side reached 830,000 won ($568), while Korea Zinc's final tender offer price went up to 890,000 won. Before the bidding war, the stock price of Korea Zinc was in the 530,000 won range.

Later in October, the zinc smelter also announced a plan to carry out a large-scale capital increase by issuing 2.5 trillion won in new shares, but the firm withdrew this plan after facing investigations over allegations of unfair trading.

Korea Zinc Chairman Choi Yun-beom speaks during a press conference at the Korea Chamber of Commerce and Industry in central Seoul, Nov. 13, announcing the withdrawal of a plan for a large-scale capital increase. Korea Times file

Currently, the MBK-Young Poong alliance is the largest shareholder of Korea Zinc with about a 47 percent voting share, while Choi and his allies are estimated to hold a 33 to 34 percent stake.

The ownership fight is now reaching a turning point as the extraordinary shareholders meeting is scheduled for Jan. 23. There, MBK aims to secure a majority on the board of directors.

What's next after winning management battle

Kim stated that, after succeeding in securing management control and completing the board reform, his company will update the implementation of Korea Zinc's Troika Drive initiative, which Choi introduced in 2022.

The initiative focuses on diversifying into new business areas, including renewable energy and secondary battery materials.

"The business plan for the Troika Drive was drafted at the end of 2023. Since then, the world has changed significantly. Domestic and international economic environments have shifted, and there is considerable debate around the electric vehicle battery sector, which is central to the Troika Drive strategy," Kim said.

"Therefore, the specific details of its implementation should be updated to reflect current realities."

Kim also emphasized the importance of resolving long-standing controversies surrounding the zinc smelter's past decisions to invest 560 billion won in OneAsia Partners and to acquire the fully capital-impaired Igneo Holdings at 580 billion won.

According to MBK, OneAsia Partners is run by Choi's middle school classmate. In addition, early investors of Igneo, a U.S.-based electronic waste recycling company, sold their shares to the zinc smelter in 2022 and made returns exceeding 100 times their initial investment.

Kim, meanwhile, disagreed with concerns that private equity's focus on short-term profits could lead to reduced investments in areas critical for long-term growth, such as research and development (R&D) and employee welfare.

He noted that Korea Zinc currently generates approximately 13 trillion won in revenue with around 1,700 employees, saying the value added per employee is remarkable.

"We aim to ensure that their benefits, salaries and overall treatment are on par with, if not better than, those of leading global companies in the industry. Without such measures, we cannot retain talented individuals with advanced skills," he said.

"R&D investment is essential and will also continue. Some initiatives under the Troika Drive are based on existing technologies, while others involve ongoing technological development. From Korea Zinc's perspective, this is uncharted territory. Neglecting investment here could hinder outcomes, so this area will not be overlooked."

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Creator of corporate value

The ongoing management rights dispute between the MBK-Young Poong alliance and Korea Zinc is evaluated by industry officials and experts as having upgraded the discussions on improving corporate governance in Korean companies.

Kim underscored that through this case, his company aims to shift the perspective of private equity as corporate raiders and demonstrate its positive role as a creator of corporate value.

"The primary focus of a buyout private equity firm, after acquiring management control, is value creation. The key question is how to drive value up, and one of the key mechanisms for doing so is improving corporate governance," Kim said.

"I believe that the introduction of the topic of whether private equity in Korea can play a role in improving corporate governance is meaningful."

Kim expressed the hope that, as a result of the Korea Zinc case, the private equity industry would no longer be subjected to misleading allegations of engaging in hostile mergers and acquisitions.

"There might be initial concerns, as it is an unprecedented experience. However, if the experience leads to positive outcomes, it will gradually reduce worries and concerns about private equity, eventually leading to more positivity," he said.