On the 12th, Korea Zinc noted that its Australian subsidiary, Sun Metals Holdings (SMH), received a cash dividend of 10.3% equity from Young Poong held by Sun Metal Corporation (SMC). Chairman Choi Yoon-bum of Korea Zinc, who is embroiled in a management dispute with the Young Poong-MBK Partners alliance, appears to have again taken measures to restrict Young Poong's voting rights in Korea Zinc's stocks.
SMH is a holding company that manages zinc refining and renewable energy businesses in Australia. SMH is a wholly-owned subsidiary of Korea Zinc, holding 100% of SMC's equity. This time, SMH received a cash dividend from SMC totaling 190,226 Young Poong shares, which is about 10.3% of Young Poong's issued shares.
On January 22 of this year, SMC invested about 57.5 billion won to purchase 190,226 Young Poong shares at 300,227.4 won per share. Subsequently, on the 11th, the board of directors resolved to approve a cash dividend. Accordingly, SMH acquired 10.3% of Young Poong shares on that day.
Korea Zinc claimed that this cash dividend has established a new inter-company relationship by changing the previous sequence of 'Korea Zinc→Sun Metals Holdings (SMH)→Sun Metal Corporation (SMC)→Young Poong→Korea Zinc' to 'Korea Zinc→Sun Metals Holdings (SMH)→Young Poong→Korea Zinc.'
Korea Zinc said, "Young Poong's voting rights will still be restricted at the regular shareholders' meeting at the end of this month."
Earlier, on January 22 of this year, Korea Zinc transferred the 10.3% equity held by Young Poong Precision Corporation and relatives of Chairman Choi Yoon-bum to SMC. This created an inter-company investment structure, leading to the application of the corporate law's voting rights restriction provisions, preventing Young Poong from exercising its voting rights. At the extraordinary shareholders' meeting held on January 23, Young Poong was entirely restricted from voting and was unable to cast a single vote.
Subsequently, Young Poong applied to the court for a temporary injunction to suspend the effectiveness of the shareholders' meeting resolution, arguing that SMC, whose official name is 'Sun Metals Corporation Pty Ltd,' is too close to a limited company, thus the inter-company voting rights restriction clause cannot be applied. The court sided with Young Poong, concluding that the voting rights restriction was illegal. The court ruled that Article 369, Section 3 of the Corporate Law regulates only inter-company investments between 'corporations' and does not apply to limited companies.
To avoid voting rights restrictions, Young Poong established a limited liability company, YPC, on the 7th and contributed all of its shares in Korea Zinc (5,262,450 shares, or 25.4%) as a cash contribution. However, Korea Zinc pointed out that since YPC acquired the equity after the regular shareholders' meeting closure date (December 31 of last year), it cannot exercise voting rights in this regular shareholders' meeting.
Korea Zinc remarked, "In a situation where the risk of Young Poong and SMH, SMC becoming the second Homeplus grows if MBK's hostile M&A succeeds, this cash dividend is a rational and legitimate business activity," stating that it is a legal action taken to protect the corporate value of SMH and SMC and the interests of all stakeholders.