Korea Zinc pulls $1.8 billion share sale, turns sights to board fight

SEOUL (Reuters) -Korea Zinc said on Wednesday it has decided to withdraw its plan to issue new shares worth $1.8 billion after the proposal sparked an investigation by the financial watchdog and a sell-off in the company’s stock.

The world’s biggest zinc refiner is now bracing for a major showdown with Young Poong and private equity firm MBK Partners at a shareholder meeting in an escalating takeover battle between the two founding family members of Korea Zinc.

“We have decided to humbly accept concerns from the market and shareholders,” Korea Zinc said in a statement.

“Our company will win at a shareholder meeting by putting forward the company’s long-term … vision.”

The share sale withdrawal marks a setback for Korea Zinc Chairman Yun B. Choi, who was seen backing the issue plan to ward off a takeover attempt by Young Poong and MBK, who have increased their stake to nearly 40% after a tender offer, versus about 35% stake held by Choi and his friendly groups.

Korea Zinc said in a regulatory filing it has decided not to pursue the share issue in view of concerns among investors and regulatory scrutiny.

Korea Zinc shares initially rose 6% after the withdrawal of the plan, but fell 7% in afternoon trade.

On Oct. 30, Korea Zinc announced a plan to issue new shares equivalent to nearly 20% of its total shares just two days after it bought back stock at a higher price.

South Korea’s financial market watchdog launched an investigation into whether Korea Zinc’s decision to issue new shares involved any unfair practice. The Financial Supervisory Service (FSS) also put brakes on the plan by ordering the company to revise its stock exchange filing on the share issuance.