Youngpoong and MBK Express Regret Over First-Instance Defeat, Plan Immediate Appeal; Korea Zinc Calls for Halt to Lawsuits and Public Campaigns

Youngpoong and MBK Partners expressed regret on October 22 over losing the first-instance trial in a shareholder derivative suit filed against Korea Zinc's board of directors regarding the company's tender offer for treasury shares, announcing that they will immediately appeal.

The 30th Civil Division of the Seoul Central District Court delivered its ruling in the first-instance trial for the damages suit filed by Youngpoong against 10 Korea Zinc directors, including Chairman Choi Yun-beom.

Youngpoong had previously filed the lawsuit, claiming that Korea Zinc inflicted damages amounting to 673.2 billion won on the company by conducting a tender offer for treasury shares at 890,000 won per share—higher than the stock price at the time—amid a management control dispute.

The court ruled in favor of Korea Zinc, stating, "Considering that they reviewed legal advice and applications for provisional injunctions and based their decision on a capital-raising plan incorporating a certain premium rate, if those judgments were not manifestly unreasonable, they cannot be evaluated as a breach of the duty of due care as a good manager or the duty of loyalty."

In an official statement, Youngpoong and MBK argued, "While the court broadly recognized the management discretion and procedural judgments of Korea Zinc's board of directors, it failed to sufficiently consider the impact that the treasury share tender offer had on the company's financial structure and shareholder value."

They pointed out that in order to carry out a treasury share tender offer worth approximately 2 trillion won, Korea Zinc borrowed over 1.6 trillion won, shifting its financial structure from a net cash position to a net debt position.

They also criticized, "Purchasing treasury shares at 890,000 won per share caused losses exceeding 830 billion won to the company, and the subsequent 2 trillion-won public offering of paid-in capital was also an attempt to pass the debt burden incurred during the tender offer process onto shareholders."

Youngpoong and MBK emphasized, "The discretionary management judgment of directors receives legal protection only when it is faithfully exercised for the interests of the company and all shareholders. We will thoroughly examine the illegality of the treasury share tender offer and the breach of the duty of due care by the board members in higher courts."

In response, Korea Zinc stated, "This ruling clearly confirms that this was a hostile M&A attempt by predatory capital. We demand that they immediately halt actions that pressure the company, management, and directors through lawsuits, raising suspicions, and public campaigns."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.