On the 27th, the Young Poong-MBK Partners alliance suddenly resolved to distribute Young Poong's stock dividends, while Korea Zinc's regular shareholders' meeting is scheduled for the 28th. The Young Poong-MBK Partners alliance reduced Korea Zinc subsidiary Sunmetal Holdings (SMH)'s equity stake in Young Poong to less than 10% by increasing the new shares of Young Poong. This was a response to the court's ruling the previous day, which acknowledged the restrictions on Young Poong's voting rights, thus resolving the mutual stock relationship in another way.
At the regular shareholders' meeting on the same day, Young Poong-MBK noted that if Chairman Choi's side again restricts Young Poong's voting rights, it would constitute an illegal act, stating they would apply for an injunction to suspend the effectiveness of the shareholders' meeting once more. In contrast, Chairman Choi's side argued that the issue could be resolved if SMH increased its equity stake in Young Poong back above 10%. Legal experts believe there is a high likelihood that the regular shareholders' meeting could become chaotic.
◇ As the court acknowledges the mutual stock relationship... Young Poong carries out sudden stock dividends
According to the investment banking (IB) industry on the 28th, Young Poong held a shareholders' meeting the previous night and distributed 0.04 shares per common share. Originally, Young Poong had a total of 1,842,040 issued shares, and SMH held 190,226 of those. However, due to this dividend, an additional 68,805 new shares were issued, resulting in SMH's equity stake in Young Poong dropping below 10%. Since SMH did not hold Young Poong shares on the record date for the closed shareholder list (December 31 of last year), it is unable to receive dividends.
Young Poong's sudden stock dividend is a measure taken in response to the court's dismissal of the injunction against the exercise of voting rights at the shareholders' meeting. The Seoul Central District Court, Civil Agreement Division 50, ruled the previous day that "Young Poong cannot exercise its voting rights at Korea Zinc's regular shareholders' meeting." This acknowledged the mutual stock relationship established between Young Poong and Korea Zinc due to SMH holding Young Poong shares. This is contrary to the earlier decision by the same court on the 7th, which suspended the effectiveness of the temporary shareholders' meeting resolution. At that time, the court did not recognize the mutual stock relationship created between Young Poong and Korea Zinc through its Australian subsidiary SMC, thereby invalidating the temporary shareholders' meeting's results that restricted Young Poong's voting rights.
If the restriction on Young Poong's voting rights is lifted, the results of this shareholders' meeting are expected to be close or more favorable to Young Poong-MBK. According to Korea Zinc's shareholder list, the equity stake of MBK-Young Poong stands at 40.97%, while the Choi family and friendly shareholders' stake is approximately 34%. However, some friendly shareholders of the Choi family, such as Hyundai Motors, are unlikely to exercise their voting rights, similar to the last temporary shareholders' meeting.
The equity stake of the casting voters, who do not belong to either side, totals 12.5%, with the National Pension Service, holding 4.5%, siding with Chairman Choi. Foreign investors, with a 7% stake, are likely to follow the recommendations of the global voting advisory firms (Glass Lewis and ISS), both of which have effectively endorsed MBK-Young Poong. The combined equity stake of domestic institutions and individuals is less than 1%. The company's own shares account for approximately 12.26% of the total shares.
◇ A chaotic shareholders' meeting is inevitable... SMH is likely to acquire more Young Poong shares
Young Poong-MBK is expected to contest the restriction on Young Poong's voting rights based on the current stock dividend. The chairperson of the regular shareholders' meeting on that day is Park Gi-deok, the representative of Korea Zinc. Korea Zinc is expected to enforce the restriction on Young Poong's voting rights based on the court's ruling from the previous day, heightening the likelihood of chaos at the shareholders' meeting, as Young Poong-MBK has indicated it will not comply.
A Young Poong-MBK official stated, "If the chairperson restricts Young Poong's voting rights despite SMH's stake being below 10%, this is clearly an illegal act," adding, "We will apply for an injunction again under the Companies Act's right to request cancellation of the shareholders' meeting resolution."
Despite the restriction on voting rights that day, Young Poong-MBK is expected to remain in the meeting and not leave until the end. This strategy aims to document all of the chairperson's "illegal acts" to gain a favorable position in future injunctions.
Chairman Choi's side, caught off guard, appears likely to have SMH acquire additional Young Poong shares, forming the mutual stock relationship once more. A legal expert stated, "Last time, SMH received Young Poong shares as in-kind dividends from SMC, creating a mutual stock relationship between Young Poong and Korea Zinc, which was recognized by the court. If SMH acquires additional Young Poong shares today, raising its stake above 10% again, the mutual stock relationship will be established once more, resolving the legal issues."
Meanwhile, the regular shareholders' meeting, originally scheduled to start at 9 a.m., has yet to convene as of 9:50 a.m. In response, Young Poong-MBK has stated, "It seems they are stalling for time to transfer shares from internal figures, such as Young Poong Precision Corporation, to the paper company SMH."