Market watchdog investigates Korea Zink share issuance plan

SEOUL: South Korea’s financial market watchdog is investigating whether Korea Zinc’s decision to issue new shares involves unfair practices, it said on Thursday.

The world’s largest zinc refiner announced a plan on Wednesday to issue shares worth about $1.8 billion. This is seen by analysts as a strategy to fend off a takeover by Young Poong and MBK Partners, causing the shares to plummet.

Two days earlier, Korea Zinc bought back shares at a higher price and promised to cancel them all to increase shareholder value.

The Financial Supervisory Service is investigating whether Korea Zinc abandoned its plan to deliberately issue new shares when it offered to buy back shares through a tender offer.

The regulator said Mirae Asset Securities, which was involved in both the share offering and the takeover bid, is also under investigation, adding that the discovery of any wrongdoing could result in a criminal investigation.

“We will hold the company and its affiliated stock brokerage accountable if there is any unfair trading or misconduct,” Hahm Yong-il, senior deputy governor of the Financial Supervisory Service, said at a briefing.

“We can never ignore this issue as it is related to the issue of increasing corporate value and improving corporate governance.”

Mirae Asset Securities declined to comment. A representative for Korea Zinc was not immediately available for comment.

Korea Zinc is run by the Choi family and is locked in a bitter battle with its co-founding Chang family to gain control of the $18 billion zinc empire. The Changs’ Young Poong conglomerate made an initial joint bid with private equity firm MBK Partners in September.

The regulator also said it is investigating alleged accounting fraud at Korea Zinc and will decide soon whether to launch a formal investigation.