Korea Zinc Power Struggle: Can Meritz Securities and NPS save Chairman Choi?

As the battle for control over Korea Zinc escalates, attention is turning to whether Meritz Securities and the National Pension Service (NPS) will play crucial roles in supporting Chairman Choi Yoon-beom against the Youngpoong-MBK consortium. /News1

As the management dispute between Youngpoong, MBK Partners (a private equity firm), and Korea Zinc’s leadership intensifies, there are growing speculations that Meritz Securities might step in as a ‘white knight’ to support Choi Yoon-beom, the chairman of Korea Zinc. Some also suggest that the National Pension Service (NPS), a key investor in MBK and holder of a 7.8% stake in Korea Zinc, could play a significant role in this unfolding conflict.

According to the industry insiders, Chairman Choi has recently requested financial assistance of 300 billion won ($224 million) from Meritz Securities.

To defend his position in Korea Zinc, Choi needs an additional 6% stake, which would require roughly around $746 million based on the 750,000 won per share offer made by the Youngpoong-MBK consortium. Besides Meritz Securities, Choi is reportedly in talks with several private equity firms, including Bain Capital and KKR, to secure the necessary funds.

Meanwhile, the Youngpoong-MBK side is in the process of conducting a tender offer to take control of Korea Zinc. The consortium currently holds a 33.13% stake and plans to acquire an additional 7% to 14.6% through this offer. In response, Chairman Choi is said to be considering a counter-tender offer.

In this context, the potential role of the National Pension Service has come into the spotlight. Currently, NPS holds a 7.8% stake in Korea Zinc. Industry insiders estimate that the group supporting Chairman Choi, which includes friendly shares from companies like LG Chem, Hyundai Motors, and Hanwha Group, controls about 34% of Korea Zinc. With the NPS’s involvement, this figure could surpass 40%. While this isn’t an outright majority, it would still give Choi significant influence.

Kang Seong-doo, CEO of Youngpoong (Left), speaks at a press conference held at the Press Center in Jung-gu, Seoul, explaining the tender offer for shares of Korea Zinc on Sept. 27, 2024. /News1

Furthermore, a substantial portion of MBK’s capital is said to come from S. Korean sources, most notably the National Pension Service. One IB insider explained, “It is widely known that the majority of MBK’s Korean funding comes from NPS. Other MBK capital mainly comes from institutional investors in the U.S., Europe, and the Middle East, with about 5% from China.”

Earlier this year, NPS selected MBK as one of its private equity fund managers for a $1.16 billion investment, a decision that has drawn attention in political circles.

Park Hee-seung, a lawmaker from the Democratic Party, mentioned that during this year’s audit, they plan to carefully examine whether MBK Partners’ selection as NPS’s private equity manager, as well as the various controversies surrounding MBK, align with ESG (Environmental, Social, and Governance) principles. Another IB insider pointed out that NPS is likely the only domestic entity that can realistically challenge MBK.

[Lee Hai-woon]

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