MBK's claim over discounted Hanwha share sale dismissed

837 billion won suit over share buyback also thrown out

Korea Zinc calls decisions 'reasonable business judgment'; MBK, Young Poong to appeal

An aerial view of Korea Zinc's Onsan smelter [Korea Zinc]
An aerial view of Korea Zinc's Onsan smelter [Korea Zinc]

Korea Zinc has prevailed in a damages lawsuit brought by MBK Partners over the sale of its stake in Hanwha, and on the same day won a separate shareholder derivative suit worth 837 billion won ($632 million) tied to its share buyback — dealing back-to-back setbacks to MBK Partners and Young Poong's efforts to hold Korea Zinc's management legally accountable.

The Seoul Central District Court's 21st Civil Division on Thursday dismissed a damages claim filed by Korea Enterprise Investment Holdings, an SPC controlled by MBK Partners, against Korea Zinc's management.

The suit stemmed from Korea Zinc's November 2024 sale of 5,436,380 shares in Hanwha — a 7.25 percent stake — to Hanwha Energy.

Korea Zinc had said at the time that it sold the Hanwha stake to improve its financial structure and secure liquidity after buying back its own shares in response to a tender offer by MBK Partners and Young Poong, describing the move as a management decision made in light of its financial position and market conditions.

MBK Partners, however, argued that the stake was sold below fair value and that the transaction caused losses to Korea Zinc. It filed a shareholder derivative suit last May, alleging that Chairman Choi Yun-beom and CEO Park Ki-deok disposed of the shares without board approval.

The initial damages claim stood at about 19.6 billion won. MBK Partners revised the figure in June, seeking about 275.9 billion won as its primary claim and about 30.4 billion won as an alternative claim in the event the primary demand was rejected.

Korea Zinc maintained throughout that the sale price reflected market conditions at the time and that the transaction was conducted in accordance with relevant laws and internal procedures. It also argued that the sale generated funds that strengthened its financial position.

The court sided with Korea Zinc and ruled against the plaintiff.

Earlier the same morning, a separate shareholder derivative suit worth 837 billion won filed by Young Poong over Korea Zinc's share buyback was also dismissed.

The Seoul Central District Court's 30th Civil Division ruled against the plaintiff in the damages suit targeting Chairman Choi and nine other Korea Zinc directors.

That suit arose from Korea Zinc's tender offer for its own shares at 890,000 won per share during the 2024 management control dispute. Young Poong argued that buying back shares at a price above the prevailing market rate inflicted losses on the company.

The court noted that the directors had reviewed external legal advice and related injunction rulings before deciding to proceed with the buyback, and had also considered financing options. On that basis, it found that the business judgment could not be deemed grossly unreasonable and did not constitute a breach of the directors' duty of care or duty of loyalty.

The court also rejected Young Poong's argument that using a specific-purpose discretionary reserve to fund the share buyback violated the Commercial Act or the company's articles of incorporation.

Korea Zinc said the twin rulings showed that the court had rejected the damages claims repeatedly brought against its management, and that the decisions validated choices made in light of the company's financial circumstances and operational needs at the time.

The company also said MBK Partners and Young Poong had filed repeated lawsuits in the course of pursuing management control, placing a burden on normal business operations, and warned that a prolonged legal dispute could weigh on the company's investment activities and shareholder value.

Korea Zinc said it would continue to respond to the management control dispute while focusing on strengthening the competitiveness of its core businesses and securing a stable foundation for growth.

The legal battle is not over, however. MBK Partners and Young Poong said they would appeal the first-instance ruling on the share buyback suit. The management control dispute and related litigation between the two sides are therefore expected to continue for now.


kwater@heraldcorp.com