Korea Zinc Management Dispute Highlights Shifting M&A Landscape

Korea Zinc is currently the stage for an intense, ongoing battle for management control, pitting the alliance of Yeongpung and MBK Partners against Chairman Choi Yoon-bum's camp. This dispute, which has captivated the South Korean M&A market over the past one to two years, exemplifies a significant shift in corporate governance dynamics. The situation is complex, with the attacking side holding a majority of shares and the defending side maintaining a majority on the board of directors, indicating that the conflict is far from over.

The high-profile nature of the Korea Zinc case has been amplified by the recent struggles of Homeplus, a major retail chain, which entered receivership in March 2025. This event has cast a spotlight on MBK's investment responsibilities and its corporate rehabilitation capabilities, demonstrating how a private equity firm's past performance can impact its credibility and the perceived cost of its future M&A endeavors.

South Korean management disputes typically fall into three categories: hostile takeovers by external forces like private equity or activist funds (exemplified by Korea Zinc-MBK), internal conflicts within owner families following succession or ownership restructuring (seen in Hanmi Pharmaceutical and Kolmar Holdings), and pressure from activist funds or minority shareholders (as with KCGI's actions against Hanjin KAL or Align Partners' campaign at SM Entertainment). These categories often overlap, with internal strife creating openings for external capital and activist pressure leading to shifts in alliances and legal challenges.

Korea Zinc's situation is particularly noteworthy because it confirms the possibility of hostile M&A against large, reputable South Korean companies. Previously, such takeovers were considered unlikely to succeed. However, a confluence of factors, including market liquidity, private equity fundraising capabilities, the proliferation of activist capital, and the increasing institutional legitimacy of shareholder activism, has fundamentally shaken traditional corporate defense strategies. Companies become vulnerable when their largest shareholder's stake is low, their allied shareholders are uncertain, they possess significant cash reserves and treasury stock, and their stock price underperforms their intrinsic value. Vague dividend and investment policies, or a lack of transparency regarding inter-affiliate transactions and succession plans, further increase their attractiveness as targets.

The legal system plays a crucial role, with court decisions on provisional injunctions related to new share issuances, treasury stock disposals, voting rights restrictions, and the convening of extraordinary general meetings often proving decisive, sometimes more so than public tender offers. Institutional investors like the National Pension Service, foreign institutions, proxy advisors, and even platforms for small shareholders are no longer passive observers. Ultimately, determining the winner in a management rights dispute is multifaceted. It can be the entity that secures control of the board, the investor who exits at a high price, or the company that ultimately enhances its value and competitiveness post-dispute. Success hinges on the quality of alliances, strategic timing, the strength of the narrative presented to stakeholders, and the endurance to navigate a protracted conflict.