Kim Kwang-il, center, a partner at MBK Partners, speaks during a press conference at Lotte Hotel Seoul, Sept. 19. Yonhap

A battle for the management rights of Korea Zinc has reached its peak, as an alliance between private equity firm MBK Partners and Young Poong raised the tender offer price to 830,000 won ($620), Friday, to gain a controlling stake in the world's largest zinc smelter.

This matches a counteroffer launched by Korea Zinc, led by Chairman Choi Yoon-beom, last Wednesday.

As the battle for management control escalates into a bidding war, concerns have emerged in the market that whichever side prevails may face a winner's curse that could jeopardize their financial stability.

Early last month, the smelter's stock price was hovering around the 500,000 won range. However, the fierce battle has driven the firm's shares to a record high, surging 8.84 percent to 776,000 won.

MBK, which partnered with Young Poong, currently the largest shareholder of Korea Zinc, is engaged in a corporate governance dispute with the company's management centered on differing perspectives regarding strategic direction and financial performance.

The alliance announced a decision to increase its offer price for the smelter on the last trading day before its original tender offer, launched on Sept. 13, was set to expire.

The private equity firm had raised its original tender offer price to 750,000 won from 660,000 won on Sept. 26.

With the offer price raised once again, MBK's tender offer has been extended until Oct. 14, with the required funds increasing from approximately 2.27 trillion won to 2.5 trillion won.

"I believe it will take a bit more time for the market to fully understand that Choi's tender offer to buy back treasury shares carries significant legal risks, such as breach of trust, and that it could cause financial harm to the company and remaining shareholders. Therefore, we changed the conditions (for our tender offer)," said Kim Kwang-il, an MBK partner overseeing the Korea Zinc deal.

"Whether it's one share or three million shares, we will buy them all to ensure that Korea Zinc's corporate governance is properly established and to restore the seriously damaged corporate value and shareholder value."

Currently, Choi and his allies hold approximately 34 percent of all the shares, while MBK and Young Poong own 33.1 percent.

Through the tender offer, MBK is seeking to acquire up to 14.6 percent of the zinc smelting firm's shares to become its largest shareholder and oust Choi.

Korea Zinc Chairman Choi Yoon-beom, center, speaks during a press conference at the Grand Hyatt Seoul, Wednesday. Yonhap

In response, Choi joined hands with Bain Capital, a U.S.-based private equity firm, and launched the counteroffer last Wednesday to buy back up to 18 percent of its treasury shares at 830,000 won per stock until Oct. 23.

Choi was able to launch the counteroffer as a Seoul court, earlier that day, dismissed MBK's injunction request to prevent the smelter and its affiliates from buying back their treasury shares.

In response, the MBK-Young Poong coalition filed an additional injunction request later that day to halt the smelting firm's treasury stock acquisition process, arguing that its buyback of treasury shares could lead to a breach of trust. They claimed that purchasing treasury shares at an abnormally high price above the market rate would be detrimental to the company.

Korea Zinc said in a regulatory filing that it will allocate 1.5 trillion won of its own funds and borrow an additional 1.16 trillion won for the counteroffer.

MBK contends that the 1.5 trillion won is primarily borrowed funds rather than the smelter's own capital, criticizing the company for "misrepresenting the reality."

Smartkarma, a Singapore-based investment research firm, highlighted the uncertainties surrounding Choi's share repurchase, noting that various legal issues could arise, including claims of market manipulation.

The research firm said Choi's buyback could "look like a blatant move to mess with MBK's offer, which means we could be looking at not just market manipulation accusations but also breach of fiduciary duty."

"Basically, if Korea Zinc buys back shares at a price above MBK's offer, especially knowing the stock could tank post-MBK tender, it could turn into a serious mismanagement issue. This could spark a fresh legal fight, regardless of today's (Wednesday) court ruling," it added.