Korea Zinc faces high-stakes shareholders' meeting amid proxy battle
Korea Zinc, the world's largest zinc smelter, is preparing for a pivotal general shareholders' meeting later this month amid an ongoing proxy battle with its major shareholder Young Poong and private equity firm MBK Partners.
Korea Zinc has scheduled its regular shareholders' meeting for March 28 with seven agenda items, including setting a cap on the number of directors, appointing an outside director as chairman of the board, and introducing quarterly dividend payments.
The upcoming meeting is set against the backdrop of an ongoing dispute that began in late 2024 when the Young Poong-MBK alliance sought greater influence over Korea Zinc's management.
The MBK faction holds a 40.97 percent stake in Korea Zinc, compared to a 34.35 percent held by Korea Zinc Chairman Choi Yun-beom and his allies.
The shareholder proposals put forward by Korea Zinc were again suspended earlier this month when a Seoul court accepted an injunction invalidating a resolution approved by Korea Zinc's extraordinary general meeting of shareholders on Jan. 23.
'These agenda items were all approved by the five major domestic and foreign proxy advisory firms, including Glass Lewis, ISS, the Korea ESG Institute, and Korea ESG Standards, and were approved by more than 95 percent of domestic and foreign institutional investors, including the National Pension Service and global pension funds, at the extraordinary general meeting of shareholders,' a Korea Zinc official said.
Korea Zinc's board of directors currently consists of 12 members, including 11 from the firm's management side and one from its rival in the proxy fight.
In addition to the existing board of directors, Korea Zinc recommended five to eight director candidates, while MBK and Young Poong requested the selection of 17 director candidates through shareholder proposals last month.
'If 17 additional directors are appointed as proposed by MBK and Young Poong, the board will become excessively large, which will weaken the responsibility and authority of the directors and place a great burden on the board's operation,' the Korea Zinc official said.
The central issue influencing the upcoming shareholders' meeting is whether Young Poong, which holds a 25.42 percent stake in Korea Zinc, will have its voting rights restricted due to a newly established cross-shareholding structure.
On Thursday, Korea Zinc's wholly owned Australian subsidiary, Sun Metals Holdings, said it received a 10.3 percent stake in Young Poong as a dividend-in-kind from Sun Metals Corporation, creating a cross-shareholding scenario where both companies hold significant stakes in each other.
Under Korea's Commercial Act, when two companies each hold more than 10 percent of the other's shares, their voting rights in each other's shareholder meetings are restricted. Korea Zinc's management asserts that this provision applies, thereby limiting Young Poong's ability to exercise its voting rights at the forthcoming meeting.
If restricted, the current management, led by Chairman Choi, is more likely to secure the passage of proposed agenda items, including amendments to the articles of incorporation and board appointments.
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