- Korea Zinc management excludes Young Poong's voting rights
- Young Poong, MBK vow to hold Korea Zinc responsible for invalid shareholders' meeting
- Takeover battle pits two founding families against each other
SEOUL, Jan 23 (Reuters) - Korea Zinc held a special shareholders' meeting on Thursday to elect new board members, opening another chapter in a bitter four-month takeover battle for the world's top refined zinc producer.
In the meeting finally held after hours of delay, however, Korea Zinc management said its rival and major shareholder Young Poong does not have voting rights, causing consternation from representatives of Young Poong and its takeover partner, private equity firm MBK Partners.
Young Poong and MBK have been attempting to wrest control away from Korea Zinc's current management, led by Chairman Yun B. Choi, since September and have amassed a 40.97% stake in the firm, according to a December regulatory filing.
Korea Zinc's Choi has an estimated 34.42% backing him, according to local media.
Attempting to control the board, Young Poong and MBK have proposed 14 new candidates, while Korea Zinc's management has nominated seven. The firm currently has 13 board members, with one board member having tendered their resignation.
As the shareholders' meeting began, Korea Zinc management said Young Poong's shares would be excluded from voting. Young Poong had a 25.42% stake in Korea Zinc as of a December filing.
The reason cited for the exclusion was that entities related to Korea Zinc sold a stake larger than 10% in Young Poong to Korea Zinc's Australian unit Sun Metals Corp (SMC) according to a filing on Wednesday, creating a cross shareholding structure.
Korea Zinc said in an emailed statement that according to South Korea's Commercial Act, because a Korea Zinc subsidiary has more than a 10% stake in Young Poong, Young Poong's stake in Korea Zinc does not have voting rights.
MBK said in its own statement the Commercial Act provision only applies to domestic companies and does not apply to SMC.
"This is a grossly unjust decision," said a lawyer representing Young Poong and MBK in the shareholders' meeting.
"We will hold you responsible for the failure of a valid shareholders' meeting," the lawyer said.
It was not clear what the outcome of Korea Zinc's move will be.
The takeover battle has pitted members of Korea Zinc's two founding families against each other.
Choi, a grandson of the company's co-founder, had taken a series of steps to try to thwart the takeover bid including promising to give its board more independence by making way for an outsider to become its chair, as well as underscoring Korea Zinc's role in the global supply chain for materials outside China.
MBK and Young Poong have said Korea Zinc's current board of directors do not take into account shareholders' interests, and vowed to improve governance at the zinc refiner.
Reactions have been divided. MBK and Young Poong have gained the backing of proxy adviser ISS, while Choi has gained the backing of proxy adviser Glass Lewis.
Reporting by Joyce Lee; Editing by Miyoung Kim, Saad Sayeed and Tom Hogue
Source: Reuters