Korea Zinc Chairman Choi Yun-beom, left, and Hanwha Group Vice Chairman Kim Dong-kwan listen to Prime Minister Han Duck-soo, not pictured, during Han's meeting with businesspeople at the World Economic Forum in Davos, Switzerland, in this Jan. 18 photo. Courtesy of Prime Minister's Office

Conglomerates holding stakes in Korea Zinc have begun expressing concerns about possible fallout from an intensifying conflict between owner families over management rights to the world's largest zinc smelting company.

Hanwha Group and LG Chem, which have 7.75 percent and 1.89 percent shares in Korea Zinc, respectively, said that their partnerships with the smelter may face setbacks if the feud is prolonged.

“We hope for a smooth business partnership with Korea Zinc,” a Hanwha Group official said.

Since 2022, Korea Zinc Chairman Choi Yun-beom and Young Poong Group adviser Chang Hyung-jin have been locking horns over Korea Zinc's management rights following the chairman's efforts to gain independence from Young Poong. Korea Zinc is Young Poong's key unit.

Their dispute escalated as Chang joined hands with MBK Partners, allowing the latter to inherit Young Poong's position as Korea Zinc's largest shareholder and oust Choi from the smelting company's chairmanship.

Last week, Choi reportedly met with Hanwha Group Vice Chairman Kim Dong-kwan to discuss responses to Young Poong's takeover bid. Both Choi and Kim are graduates of St. Paul's School in the United States.

However, it remains to be seen whether Hanwha Group and LG Chem will spend their money in Choi's favor, as both companies have yet to disclose their stances to investors.

Hyundai Motor Group, which has a 5.05 percent stake in Korea Zinc, has also remained silent about the feud despite its strong partnership for a stable supply of nickel, one of the core minerals for electric vehicle batteries.

Among Korean conglomerates holding stakes in Korea Zinc, Hankook Tire & Technology, which owns a 0.75 percent stake, is the only company that has disclosed its intention to side with Choi.

Last year, Hankook Tire managed to defy MBK's bid to oust Chairman Cho Hyun-bum of Hankook & Company, the tiremaker's parent firm, when the private equity firm joined hands with Cho's disgruntled siblings. Choi and Cho are also known to be maintaining a close friendship.

Against this backdrop, speculation is growing that the Korea Zinc chairman may ask for help from Korea Investment Holdings Chairman Kim Nam-goo, who also formed a friendship with him. SoftBank, Bain Capital and raw materials producers in Japan and Australia are also mentioned as possible white knights for Choi.

Kim Kwang-il, right, a partner at MBK Partners, speaks during a press conference at Lotte Hotel Seoul, Thursday. On his left is Young Poong President Kang Sung-doo. Yonhap

In response, MBK expressed its confidence that Choi's alliances with major conglomerates in and outside of Korea are unlikely. The private equity firm pointed out that Hyundai Motor, Hanwha and LG are not able to side with Choi without disclosing their stances in advance to investors.

“If SoftBank and Bain Capital acquire Korea Zinc's shares after the stock price hike caused by our tender offer, it will be difficult for them to devise exit plans,” MBK said in a statement.

“Although Trafigura, Glencore and Sumitomo may purchase Korea Zinc's shares for higher prices, they will likely raise the prices of raw materials supplied to the Korean firm, deteriorating the profitability of the smelting company.”

Questions are also growing over the series of revelations about Choi's meetings with representatives from the companies mentioned as Korea Zinc's allies, given that a non-disclosure agreement is prerequisite to most major investments.

Amid the intensifying dispute, Korea Zinc said it will unveil its strategies to defeat MBK and Young Poong during a press conference today in Seoul. Korea Zinc Chief Technology Officer Lee Je-joong will attend the event with the company's engineers.