Korea Zinc (010130.KS) will conduct a 2.851 trillion won ($2 billion) rights issue targeting the U.S. government and strategic investors.
Korea Zinc said Wednesday that its board approved the construction of a new smelter in the United States worth up to 11 trillion won ($7.8 billion). The new facility will be built on the site of the Nyrstar smelter in Clarksville, Tennessee, after acquiring the property and rebuilding infrastructure to match the scale of Korea Zinc's Onsan smelter in South Korea.
The U.S. government and defense companies will participate as investors in the project. Korea Zinc plans to allocate a 10% stake to the U.S. Department of Defense and other parties through a third-party rights issue.
The U.S. side views securing a stake as necessary given Korea Zinc's emergence as a key company in the "de-China supply chain." Korea Zinc, currently embroiled in a management dispute, also welcomes the move as it could secure the U.S. government as a white knight.
The development marks a new phase in the ongoing management control battle between Korea Zinc and the Young Poong-MBK alliance. Directors representing the Young Poong-MBK side opposed the rights issue linked to the U.S. smelter construction at the board meeting and indicated they would pursue legal action, including filing for an injunction to block the capital increase.
If the U.S. smelter construction and rights issue proceed, Korea Zinc Chairman Choi Yun-beom, who has been at a disadvantage in the stake competition, could swiftly reverse his position.
"The proxy battle between the two sides is expected to intensify at the annual shareholders' meeting in March next year," an industry source said. "Young Poong and MBK are likely to file lawsuits to invalidate the rights issue, reigniting legal disputes."
