MBK, Youngpoong to Seek Injunction Against Korea Zinc's $8B US Investment

Youngpoong and MBK Partners said they will take legal action to block Korea Zinc's (010130.KS) decision to invest approximately 11 trillion won ($8 billion) in the United States.

Korea Zinc's board approved plans to build a large-scale production facility in Tennessee capable of producing 13 types of non-ferrous metals. Despite being Korea Zinc's largest shareholders, Youngpoong and MBK Partners were not informed of the plan before the board meeting, according to sources familiar with the matter.

The shareholders plan to file for an injunction to block the new share issuance in court, citing procedural issues, potential financial burden from the investment, and possible changes to the governance structure.

"We express regret over the resolutions passed by Korea Zinc's board today, including the overseas smelter construction and third-party allotment capital increase," Youngpoong and MBK Partners said Wednesday. "We consider this a serious matter that could damage shareholder value and undermine financial stability."

"We plan to immediately file for an injunction against the new share issuance to protect Korea Zinc's long-term sustainability and shareholder interests," they added.

Korea Zinc will contribute $585 million (860 billion won) to the project, with additional funding from $4.698 billion (6.9 trillion won) in US policy finance and investor loans, plus $210 million (approximately 310 billion won) in US Department of Commerce subsidies.

The largest shareholders are challenging the unusual structure of the investment. Typically, when companies use foreign government investments or subsidies for overseas projects, they establish local production subsidiaries to receive funds or share equity stakes. Instead, Korea Zinc opted for an unconventional approach: conducting a third-party allotment capital increase to a newly formed joint venture with the US government and companies, then reinvesting those funds into a local investment holding company.

Once this indirect investment structure is completed, the US government will hold a 10.25% stake in Korea Zinc. Some industry observers have criticized this structure as a "circumvention" to secure friendly stakes amid the ongoing management dispute, rather than a genuine financing measure.

Youngpoong and MBK Partners currently hold the largest stake in Korea Zinc, but board control remains with Chairman Choi Yun-beom's side, the opposing party in the management rights dispute.

"A capital increase that sacrifices existing shareholders through an opaque equity transfer structure fails to meet business necessity and directly violates the principle of shareholder equality," Youngpoong and MBK Partners said. "We will work through legal measures to reverse this decision and ensure Korea Zinc remains a company trusted by shareholders, partners, and the nation's industry as a whole."