Family Feud Erupts Over Control of Korea Zinc’s $12 Billion Empire

Korea Zinc, the world’s largest refined zinc producer, is embroiled in a contentious takeover battle between its founding families. The outcome could significantly impact South Korea’s role in the U.S.-led efforts to reduce reliance on China for essential metals and materials used in key industries such as construction and automotive manufacturing.

The battle involves competing bids from private equity firm MBK Partners, which has joined forces with the Chang family (co-founders of Korea Zinc and leaders of rival zinc producer Young Poong), and Bain Capital, which is backing the Choi family. The Choi family has managed Korea Zinc since its founding in 1974 and is attempting to fend off the takeover attempt.

MBK Partners and Young Poong raised their offer to match a rival bid from the Choi family and Bain Capital in a $1.7 billion tender offer. MBK has plans to become Korea Zinc's largest shareholder, using a call option to buy shares owned by Young Poong and its affiliates.

Korea Zinc was founded in 1974 by the Chang and Choi families, expanding into smelting metals and becoming a global zinc powerhouse. Young Poong, which runs one of the world’s largest zinc smelters in Seokpo, South Korea, remains Korea Zinc's largest shareholder, controlling over 400,000 metric tons of zinc annually. In addition to metals, Young Poong generates a substantial portion of its revenue from smartphone components and electronics.

MBK Partners, a North Asia-focused private equity firm, has a history of major deals in South Korea, including the purchase of hypermarket chain Homeplus for $6.1 billion from Tesco in 2015. The firm is now positioning itself to take over Korea Zinc.

Korea Zinc supplies more than 85% of South Korea’s zinc, which is used in steel protection for industries such as automotive and construction. While Korea Zinc leads globally in refined zinc production, China dominates the overall market, prompting strategic moves by Korea Zinc to align with U.S. efforts to decrease dependency on China for critical materials.

Korea Zinc has formed partnerships with companies such as LG Chem and Hyundai Motor to produce battery materials, aiming to support U.S. supply chain diversification for batteries and electronics. The company also supplies sulphuric acid for semiconductor giant Samsung Electronics.

The current takeover battle stems from tensions that have been brewing since the late 2010s. At that time, Young Poong increased its stake in Korea Zinc as part of a governance restructuring, shifting the balance of power in favor of the Chang family over the Choi family. In 2019, when Yun B. Choi, a Columbia Law School graduate, took leadership of Korea Zinc, he sought to diversify the company’s operations, moving into battery materials, hydrogen, and renewable energy.

This shift sparked criticism from Young Poong, culminating in a dispute over the handling of sulphuric acid, a by-product of the Seokpo smelter. Korea Zinc announced this year that it would no longer process the acid, arguing that the costly transport and storage should be handled by Young Poong. Young Poong, in turn, accused Korea Zinc of violating a longstanding agreement, which has threatened the viability of the Seokpo smelter.

Despite both companies being in the smelting industry, Korea Zinc has reported profits for 98 consecutive quarters, while Young Poong has struggled financially. Young Poong's CEO has faced legal challenges, including charges related to safety-related deaths at the Seokpo smelter and environmental pollution allegations, which could result in the smelter being shut down for two months.

The outcome of this battle will determine control over one of South Korea’s most critical industrial players as global efforts to secure non-Chinese sources of key metals intensify.