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Korea Herald
15-05-2025
- Business
- Korea Herald
When is foreign too foreign? Korea's takeover tensions
Recent PE-involved M&A deals draw heated debate on security of key strategic technologies A recent streak of mergers and acquisitions led by private equity firms has intensified the debate over foreign-owned companies investing in Korean businesses, raising concerns about the possible outflow of key strategic technologies At the center of the controversy is a recent revision to the Enforcement Decree of the Act on Prevention of Divulgence and Protection of Industrial Technology. The updated regulation, set to take effect on July 22, does not apply "foreign investment" provisions to Korean-registered private equity firms, even if they are effectively controlled by foreign nationals. Previously, the government had considered including such firms under the scope of foreign investors. If enacted, this would have required them to seek prior approval from the Ministry of Trade, Industry and Energy before investing in local companies holding 'national core technologies.' In 2022 at an Industrial Technology Protection Committee meeting, former Industry Minister Lee Chang-yang noted that 'M&As led by local private equity firms, owned by foreigners, are tricky cases to handle." Yet the proposal was excluded from the final version of the revised decree. Experts point out that the revision has a loophole, as it does not define an investment led by a Korea-domiciled company controlled by foreign nationals as foreign. De facto control should be considered when categorizing foreign investment. 'It is not that all foreign nationals are likely to leak core technologies to other countries. That would be an exaggeration, almost xenophobic,' said a professor who specializes in technology security and wished to remain anonymous. 'But without tighter regulations on foreign ownership, foreign capital could indirectly acquire key technologies through domestic entities or funds. The legal loop provides grounds for the overseas leakage of key technologies.' A recent series of M&A deals led by such firms has brought more attention to the revised regulation and its shortcomings. Of the 'big four' PE firms in Korea, two are headed by foreign nationals. Korea Zinc, the world's largest refined zinc smelter, has been engaged in a power struggle against private equity giant MBK Partners since a buyout attempt in September. In a defensive effort to maintain control of the company, Korea Zinc called into question the nationality of the PE firm's chief and the company's funding sources. MBK is led by founder and Chair Michael Byung-ju Kim, a US national. To fend off the MBK camp, Korea Zinc acquired approval from the government to designate its high-nickel precursor manufacturing process as a national core and high-tech strategic technology, which would give the government approval rights in case of an acquisition of Korea Zinc by a foreign company. Though the designation was unlikely to block off MBK's takeover attempt, as the PE is not registered as a foreign company, it was seen as a move to pressure the rival by highlighting the potential of security threats. On a similar note, local chip-to-energy conglomerate SK Group is considering selling its controlling stake in SK Siltron, a semiconductor wafer producer. Local private equity house, Hahn & Co,. is named as a strong contender, given its close ties with the conglomerate. The PE firm has executed multiple deals with SK Group in recent years. Yet again, the nationality of its chief has come into question. While Hahn & Co. is a Korea-registered private equity house, its Chief Executive Officer Scott Sang-won Hahn is a US national. With SK Siltron's crystal growing technology designated a national core technology, a cross-border sell-off of the affiliate would require approval from the government. Hahn & Co., registered here, would be qualified without governmental approval. But the pressure of a potential security breach could work as a pressure, even undermining the firm's big store of dry powder and its strong chip network. 'When it comes to M&A deals on institutions with key strategic technology, the focus should rather be on how the given technology would be managed throughout the years,' an official from a local private equity firm said. 'A safety net is necessary, but the idea of raising guards against a company just because of a foreign national chief is outdated.'
CNA
23-04-2025
- Business
- CNA
Prosecutors raid Korea Zinc's office over probe into new share issue plan
SEOUL :South Korean prosecutors said on Wednesday they were raiding the offices of Korea Zinc as part of an investigation into the company's new share issue plan. Investigators were sent to the company's headquarters on Wednesday morning to collect evidence, the Yonhap News Agency reported, with 11 places being raided including the residence and offices of executives. Earlier this year, local media reported that regulators had asked prosecutors to investigate Korea Zinc over allegations that its now scrapped plan to issue new shares involved unfair practices. In November, the chairman of Korea Zinc's board Yun B. Choi dropped a plan to issue new shares worth $1.8 billion that had sparked an investigation by the financial watchdog and a share sell-off.
Reuters
23-04-2025
- Business
- Reuters
Prosecutors raid Korea Zinc's office over probe into new share issue plan
SEOUL, April 23 (Reuters) - South Korean prosecutors said on Wednesday they were raiding the offices of Korea Zinc ( opens new tab as part of an investigation into the company's new share issue plan. Investigators were sent to the company's headquarters on Wednesday morning to collect evidence, the Yonhap News Agency reported, with 11 places being raided including the residence and offices of executives. Earlier this year, local media reported that regulators had asked prosecutors to investigate Korea Zinc over allegations that its now scrapped plan to issue new shares involved unfair practices. In November, the chairman of Korea Zinc's board Yun B. Choi dropped a plan to issue new shares worth $1.8 billion that had sparked an investigation by the financial watchdog and a share sell-off.
Korea Herald
10-04-2025
- Business
- Korea Herald
MBK faces headwinds amid regulatory probes
Future course of fundraising overshadowed by series of probes into Homeplus investment MBK Partners could face challenges in fundraising while embroiled in controversies surrounding South Korea's No. 2 hypermarket chain, as public funds turn wary due to compliance risks, according to industry sources. Following Homeplus' application for a court-led rehabilitation, MBK has been pressured by multiple governmental bodies. MBK wholly owns the discount supermarket franchise as a portfolio company. In March, the National Tax Service launched a tax investigation into MBK. The Korea Fair Trade Commission is also looking into suspicions of alleged internal trading between MBK, Homeplus and local card issuer Lotte Card. The Financial Supervisory Service has been conducting an investigation into MBK to determine whether it was involved in the issuance of short-term bonds for Homeplus while simultaneously planning the court-led rehabilitation behind the scenes. On Thursday, FSS chief Lee Bok-hyun said the regulator has uncovered "meaningful facts" in its probe. Investors also warned they plan to sue the top executives of MBK if the private equity firm does not come up with follow-up measures soon. Industry sources believe the legal uncertainties will pile greater pressure on MBK, as the firm relies heavily on public funds for limited partners. 'Public funds are usually very concerned about compliance. Any type of noise that questions the general partner's lack of compliance can be a hurdle for the (limited partners) in making new investments. From such a perspective, the compliance risks place more pressure on MBK than the losses from investment failure,' an official from a local private equity firm said. Similar to other big-name private equity firms here, MBK largely relies on public pension funds. The firm has been pooling money from funds in and out of Korea, such as the National Pension Service, Korean Teachers' Credit Union, Canada Pension Plan Investment Board and California Public Employees Retirement System. Prior to the Homeplus failure, MBK failed to secure funding from public funds such as the Korea Scientists & Engineers Mutual-aid Association and another fund operated by the Korea Federation of SMEs last year. Though reasons were not specified, industry officials assume MBK's involvement in the Korea Zinc proxy fight took a toll. In March, the NPS issued a rare statement, saying it agreed to not participate in MBK investments related to hostile takeovers. The pension giant seldomly makes official comments on individual investments. 'In February, we finalized our agreement with MBK, explicitly including a condition prohibiting participation in hostile takeovers,' the statement read. Industry officials assume it would be difficult for MBK to secure additional funding from public funds, especially those based in Korea, until its name is fully cleared. 'MBK's (limited partners) had been aware that the Homeplus investment was going to be a failure. But the compliance risks come as a surprise. They would have to see whether the current controversies and probes will materialize into legal actions or not,' the official said. Meanwhile, MBK asserted its fundraising of capital has been successful regardless of the controversies. "These are regulatory probes on Homeplus, not legal investigations on our investment practice or compliance," a representative of MBK said.
Korea Herald
02-04-2025
- Business
- Korea Herald
MBK chief tries damage control amid Homeplus setback
MBK Partners, under pressure from the Homeplus debacle and a contentious management battle over Korea Zinc, sought to downplay the severity of the situation in its annual letter to investors, according to industry sources on Wednesday. Each year, MBK Partners Chairman Michael Byung-ju Kim sends a letter to the firm's limited partners, highlighting key achievements and investment strategies. This year's letter was distributed on March 24. 'Homeplus, one of our oldest and largest investments, filed for rehabilitation proceedings in early March,' Kim acknowledged in the letter, explaining that the move was prompted by a liquidity crunch following the retailer's credit rating downgrades. 'It is worth noting that under rehabilitation protection, MBK Partners will remain in control of operations as we seek to salvage meaningful value from our equity interest,' he added. The private equity giant has found itself in a difficult position amid criticism over the rehabilitation of the troubled hypermarket chain, with detractors accusing the firm of shirking responsibility in the face of the bankruptcy. Adding to the controversy, Korea's top financial regulator, the Financial Supervisory Service, announced Tuesday that it had uncovered 'circumstantial evidence' suggesting MBK was involved in issuing short-term bonds for Homeplus while simultaneously preparing for its rehabilitation behind the scenes. However, Kim appeared to brush aside the mounting scrutiny, characterizing the situation as 'some noise' in the media. 'We are committed to the welfare of all stakeholders, and we have announced measures to take 'societal responsibility,' including personal contributions,' he wrote, referencing his pledge to use personal assets to help resolve the crisis. In the letter, Kim also addressed the firm's attempt to acquire Korea Zinc, the world's largest zinc smelter based in Korea. 'What is frequently overlooked is that the transaction is about governance reform, which aligns with the government's CVP (Corporate Value-Up Program) initiative,' he wrote. Although MBK challenged Korea Zinc Chair Choi Yun-beom's management rights in a proxy battle — teaming up with the smelter's major shareholder and former ally turned rival, Young Poong — Choi ultimately retained control of the company. Choi secured approval for key agenda items at the company's general shareholders' meeting held on March 28. MBK and Young Poong have since announced plans to legally challenge the outcome.
