The attempt by private equity fund MBK Partners (hereinafter MBK) to acquire control of Korea Zinc has emerged as a new variable in the control dispute over Korea Zinc, specifically regarding whether it constitutes "foreign investment." Although "MBK Partners Limited Liability Company," which participated in the public equity tender for Korea Zinc, is a domestic entity, the core member, Chairman Kim Byung-joo, is an American national. If MBK's attempt to acquire control of Korea Zinc is defined as "foreign investment," then approval from government ministries will be required for the acquisition.
The Ministry of Trade, Industry and Energy designated the manufacturing and processing technology of "precursor active materials for cathodes with over 80% nickel content" owned by Korea Zinc and its subsidiary, KEMCO, as national core technology and national advanced strategic technology last month. The ministry is making it difficult for corporations with national core technology to have foreign investments or for foreigners to acquire them due to concerns over technology leaks.
According to Article 13, Paragraph 1 of the National Advanced Strategic Industries Act, corporations holding national strategic technology must obtain approval from the Minister of Trade, Industry and Energy before proceeding with foreign investment, such as overseas mergers and acquisitions or joint ventures. It also specified that after going through relevant committee reviews, measures such as suspension, prohibition, or restoration could be applicable to overseas mergers and acquisitions.
Under the enforcement decree of the National Advanced Strategic Industries Act, foreigners include individuals who do not hold South Korean nationality, corporations established under foreign laws, foreign government agencies, and international organizations. According to this, MBK Partners Limited Liability Company is not considered a foreign entity.
However, according to Article 19, Paragraph 1, Item 1(b) of the enforcement decree of the National Advanced Strategic Industries Act and Article 18-2, Paragraph 1(b) of the Industrial Technology Protection Act enforcement decree, if a company is to acquire management rights with a foreigner exercising dominant influence over key decisions such as organizational changes or new business investments either alone or through contracts or agreements with major shareholders or equity holders, it is regarded as "foreign investment" requiring approval from the Ministry of Trade, Industry and Energy.
Chairman Kim and several key personnel, including Vice Chairman Bae Mu-hun, who founded MBK, hold American nationality. Chairman Kim is known to wield significant influence internally as the chair of the Investment Review Committee. Dial Capital, a U.S.-based private equity fund management firm, is also a shareholder of MBK. Korea Zinc has claimed that to ascertain whether MBK’s attempt to acquire Korea Zinc constitutes "foreign investment," the structure of the Investment Review Committee must be examined.
A source in the legal community noted that "there have not been many cases of selling industrial technology or national core technology to foreign corporations, and there are many loopholes in related provisions. The dispute over management rights at Korea Zinc could become a matter that requires government ministry approval."
MBK argued that MBK Partners Limited Liability Company was established domestically and has major shareholders who are South Korean nationals, so it should not be a matter of controversy. MBK Partners Limited Liability Company has Vice Chairman Yoon Jong-ha and Vice Chairman Kim Kwang-il each holding 24.7%, while the MBK employee stock ownership association holds 17.4%, Chairman Kim Byung-joo holds 17%, and Dial Capital holds 16.2%. MBK stated that Dial Capital is merely a financial investor, and over 80% of voting rights are exercised by South Korean partners.
MBK has a history of investing in corporations holding national core technology. In March 2016, it acquired Doosan Machine Tools (now DN Solutions) from Doosan Group, and in November of the same year, the "design and manufacturing technology of high-precision five-axis machining centers" owned by Doosan Machine Tools was designated as national core technology. Subsequently, MBK attempted to sell it to overseas corporations, but it is known that the government intervened. In 2022, MBK sold it to domestic automotive parts maker DTR Automotive (now DN Automotive) without undergoing separate government approval.