Young Poong and MBK Partners, the largest shareholders of Korea Zinc, won in the U.S. appellate review of discovery procedures linked to their lawsuit against Korea Zinc's management and board.
On the 22nd (local time), the U.S. Court of Appeals for the Second Circuit dismissed an appeal filed by Korea Zinc's U.S. affiliate Pedalpoint and upheld the trial court's decision allowing discovery by Young Poong.
With this decision, Young Poong can continue in the United States with document production requests and witness depositions against Pedalpoint. As a result, the previously limited scope of access to materials is also expected to expand.
The industry is paying attention to the possibility that this decision will lead to a verification process surrounding the decision-making and overall transaction structure related to Korea Zinc's investment in Ignio.
Ignio, founded in 2021, is an electronic waste recycling company that Korea Zinc acquired in 2022 by investing about 580 billion won. However, it turned out that Ignio was insolvent at the time of the acquisition, and Young Poong and MBK argue that the transaction caused significant losses to the company and its shareholders.
In fact, Ignio's initial paid-in capital was only about $2.75 million (about 3.3 billion won), but Korea Zinc paid about $300 million (about 360 billion won) to acquire an initial equity stake.
Young Poong and MBK also view as unusual, compared with typical mergers and acquisitions (M&A), that acquisition talks proceeded just a few months after establishment and that the transaction was done at a high multiple relative to the initial investment.
Young Poong and MBK said they plan to use the materials obtained through this ruling to verify the appropriateness of the investment decision-making process and the transaction structure.