On the 30th, KoreaZinc closed regular trading on the KOSPI at 925,000 won, up 0.22% (2,000 won) from the previous day. KoreaZinc had fallen to 877,000 won during the previous day’s trading session, marking its lowest price of the year. The decline since the beginning of the year stands at 28.13%. Amid a general correction in the KOSPI and a lull in the dispute, KoreaZinc has been unable to escape the market’s weakness and appears to be falling in tandem with the broader market.
Significantly Below Meritz’s Reference Price… Burden of Collateral Reinforcement Intensifies
In October 2024, at the outset of the management control dispute, Chairman Choi’s camp launched a tender offer at 830,000 won per share and ultimately raised the offer price to 890,000 won to defend its position. Subsequently, during the process of restructuring the shares held by Bain Capital—a friendly shareholder—into “P23 Partners,” a special purpose company (SPC) led by Meritz Financial Group, the acquisition price per share was adjusted upward to 1,226,800 won. In particular, the loan-to-value (LTV) ratio required by Meritz’s lending syndicate reached 300%, creating a structure that was extremely vulnerable to stock price fluctuations.
With the current stock price having plummeted to around 900,000 won, it has already fallen significantly below the agreed-upon reference price for the loan. As the stock price entered the margin call zone, Meritz is reported to have recently requested and secured additional collateral from Chairman Choi’s side. This puts the ability of Chairman Choi’s family and friendly stakeholders to make additional capital contributions to the test.
Amid this situation, Chairman Choi recently established a separate limited liability company called “P121 Partners.” The investment banking (IB) industry is paying close attention to the possibility that Chairman Choi’s side established the entity preemptively to prepare for a restructuring of the equity structure, strengthening of collateral, and, furthermore, additional fundraising in response to the stock price decline.
Average Price Falls Below 940,000 Won… The Challenge of Persuading LPs
The MBK-Youngpoong consortium also failed to avoid losses. MBK initially set the price at 660,000 won during the 2024 tender offer, raised it to 750,000 won, and then to a final 830,000 won before freezing it at that level. However, to secure a competitive stake, it continued making high-priced on-market purchases—reaching up to 1.9 million won per share—through December of last year. As a result, MBK’s average purchase price soared to approximately 940,000 won per share. Based on the current stock price, an accounting loss is inevitable.
From MBK’s perspective—having executed the investment in KoreaZinc using funds from institutional investors (LPs)—it now faces the additional challenge of persuading its LPs. KoreaZinc was the inaugural investment target of MBK’s 6th Buyout Fund, which was raised to approximately 8 trillion won. With the management control dispute dragging on and the stock price continuing its downward trend, not only will the 6th Fund face the burden of valuation losses, but LPs’ concerns and scrutiny regarding the exit (recovery of investment capital) are also expected to intensify.
