A court ordered the disclosure of the management cooperation agreement that Young Poong and MBK Partners signed to acquire management control of Korea Zinc.
On the 30th, according to KZ Precision (formerly Young Poong Precision Corporation), an affiliate of Korea Zinc, the Seoul Central District Court's Civil Agreement Division 30 granted KZ Precision's request for an order to submit documents against Young Poong and Senior Adviser Jang Hyeong-jin of Young Poong, among others.
KZ Precision filed a motion with the court on the 22nd seeking an order to disclose the contract containing a call option contract and other terms entered into by Young Poong and MBK Partners during their push for a hostile merger and acquisition (M&A) of Korea Zinc.
KZ Precision, as a shareholder of Young Poong, also filed a shareholder derivative damages suit worth about 930 billion won, saying there was a possibility that Senior Adviser Jang Hyeong-jin and a Young Poong director caused losses to Young Poong.
In September last year, MBK Partners signed a shareholders' agreement with Young Poong, the family of Senior Adviser Jang Hyeong-jin of Young Poong, and others to jointly exercise voting rights, and was to be granted a call option on part of the equity owned by Young Poong and related parties.
After the management control dispute between the two sides surfaced, KZ Precision changed its name from Young Poong Precision Corporation to KZ Precision, taking the first letters of Korea Zinc (KoreaZinc). Chair Choi Chang-gyu, the younger brother of Chair Choi Yun-beom of Korea Zinc's father, runs KZ Precision.
In its decision, the court said, "(KZ Precision's application) is based on damages to Young Poong that may arise from call options and the like that could be exercised due to the document," adding, "Accordingly, there is a need to ascertain the contents in question, as the scope of granting may vary depending on the facts and the amount of damages."
It went on to note, "If the content concerns strategies to secure or maintain control over management (of Korea Zinc) in response to other forces, it is difficult to conclude that this falls under cases where there is no obligation to submit on the grounds of trade secrets."
The court rejected Young Poong and MBK's claim that the management cooperation agreement is a trade secret. The panel added, "If the strategy to secure or maintain control over management benefits certain executives but does not align with the overall interests of the company, it is desirable to allow shareholders who have filed suit to hold management accountable to use this as a subject of their oversight activities."
The document the court ordered to be submitted with details is the management cooperation agreement drafted by Young Poong and MBK Partners in September last year in the process of pursuing an acquisition of management control of Korea Zinc. Since the second half of last year, when both sides attempted the takeover, there have been various speculations surrounding the agreement, but its contents have never been disclosed.
There had been much speculation that the agreement was structured more favorably for MBK Partners than for Young Poong. A representative view was that MBK Partners had been granted a call option right to acquire Korea Zinc shares owned by Young Poong at a low price.
Under the court's decision, Senior Adviser Jang Hyeong-jin must submit to the court the management cooperation agreement and its follow-up agreements that Young Poong and MBK Partners signed. They must be submitted within nine days from the date the decision is served, so the contracts are expected to be disclosed in early Jan.
A KZ Precision official said, "The market and shareholders' questions must be clearly resolved regarding at what price and in what manner Korea Zinc shares, Young Poong's most important asset, are being transferred to MBK Partners," adding, "If the suspicions raised by the media prove true, Senior Adviser Jang Hyeong-jin and other executives will find it difficult to avoid responsibility in the shareholder derivative suit and for damages."