Ulsan Mayor Kim Doo-gyum speaks during a press conference at Ulsan City Hall, Wednesday. Wearing a jacket with Korea Zinc's logo, he urged the city's residents to buy shares in the smelting firm to prevent MBK Partners from controlling the company. Yonhap

A conflict between Young Poong's founding families over Korea Zinc's management rights has intensified, with politicians now expressing concerns over the involvement of MBK Partners in the power struggle.

Ulsan Mayor Kim Doo-gyum and the city's council members have leveled criticism at the private equity firm (PEF), which has joined hands with Young Poong to inherit its position as Korea Zinc's largest shareholder and oust Choi Yun-beom from the chairmanship of the smelting company, which has a factory in the southeastern port city.

"I want 1.2 million residents of Ulsan to buy Korea Zinc's shares, just as they carried out a campaign to acquire SK's stocks two decades ago to protect the conglomerate from a foreign hedge fund," the mayor said during a press conference, Wednesday, two days after he issued a statement alleging that MBK is backed by Chinese capital.

In response, MBK and Young Poong dismissed concerns over the PEF's plan to manage Korea Zinc, emphasizing alleged irregularities involving Choi.

"Founded in 2005 in compliance with the Financial Investment Services and Capital Markets Act, MBK is a domestic PEF under the supervision of the Korean financial authorities," the PEF said in a press release.

"We will help Korea Zinc fulfill its social responsibility as an Ulsan-based company."

MBK agreed last Thursday to acquire 50 percent plus one share of Young Poong's 33.1 percent stake in Korea Zinc and launched a tender offer of up to 2 trillion won ($1.5 billion) last Friday to become the largest shareholder of Korea Zinc.

The proposal came as the Korea Zinc chairman, who is the grandson of Young Poong co-founder Choi Ki-ho, has been at odds with Young Poong adviser Chang Hyung-jin, the son of another co-founder, Chang Byung-hee.

Since taking control of Korea Zinc in 2022, Choi has sought independence from Young Poong, despite the history of the Choi family overseeing Korea Zinc and the Chang family managing Young Poong's electronics affiliates.

Korea Zinc Chairman Choi Yun-beom, left, and Young Poong adviser Chang Hyung-jin / Courtesy of each company

On Tuesday, Rep. Park Hee-seong of the main opposition Democratic Party of Korea claimed that MBK's tender offer is a hostile takeover, sharing the view of a group of Korea Zinc's minority shareholders who credit Choi with delivering solid earnings and boosting the company's stock price.

Korea Zinc also described MBK as a corporate raider and criticized Young Poong for polluting the neighborhood of its smelter in Seokpo, Bonghwa, North Gyeongsang Province.

In response, MBK and Young Poong said that it is inappropriate to describe the tender offer as a hostile takeover, considering the fact that Young Poong and the Chang family hold a 33.1 percent stake in Korea Zinc, more than double the 15.6 percent stake held by the Choi family.

They added that Hyundai Motor, Hanwha and LG, which are among the major shareholders of Korea Zinc, are not on Choi's side, as the companies have not disclosed their intentions to exercise their voting rights in his favor.

"Those companies only mentioned their business partnerships with Korea Zinc," the PEF said.

Meritz Securities analyst Jang Jae-hyeok forecasted that it is unlikely for Korea Zinc to match the financial strength of MBK and Young Poong.

Market insiders expect the escalating tensions to raise Korea Zinc's stock price further.

Last Friday, Korea Zinc's stock price soared sharply, surpassing 660,000 won, MBK's tender offer price. It closed at 666,000 won, an increase of 19.78 percent compared to the previous trading day.