Park Ki-duk, CEO of Koryo Zinc, bangs the gavel at the 52nd Koryo Zinc Regular Shareholders' Meeting held at the Koreana Hotel in Jung-gu, Seoul on the 24th. [Yonhap News]  

With MBK Partners and Youngpoong's attempts to acquire management control of Koryo Zinc continuing for over a year and a half, Chairman Choi Yoon-bum's side successfully secured a majority on the board of directors at the shareholders' meeting on the 24th, thereby defending their management rights.

◇ Board Composition Reformed from '11:4' to '9:5'… "Confirmation of Koryo Zinc Side's Support"

Koryo Zinc held its 52nd regular shareholders' meeting at the Koreana Hotel in Jung-gu, Seoul, and resolved a total of 36 detailed agenda items across 7 main proposals.

The shareholders' meeting, initially scheduled to commence at 9 AM, was delayed until past noon due to the time required for both sides, with similar shareholdings, to meticulously verify proxy voting situations, including the classification of duplicated proxy forms, and to negotiate the outcomes.

The core agenda item of the shareholders' meeting was the appointment of directors, which determines the composition of the board of directors, the body responsible for exercising management control.

Koryo Zinc's board of directors, comprising 15 members, was composed of 11 directors recommended by Chairman Choi's side and 4 directors from the MBK and Youngpoong side.

At today's shareholders' meeting, a proxy battle took place for the seats of 6 directors whose terms were expiring (5 from Chairman Choi's side and 1 from MBK's side).

In accordance with the revised Commercial Act, Koryo Zinc proposed a '5-person appointment plan,' suggesting the election of 5 directors to separately elect two statutory auditors, leaving one seat to be filled at a later date. In response, MBK and Youngpoong proposed the collective appointment of 6 new directors.

Delay of the 52nd Koryo Zinc Regular Shareholders' Meeting [Yonhap News]  

The results of the proxy battle showed that both the '5-person appointment plan' (62.98% approval rate among attending shareholders) and the '6-person appointment plan' (52.21%) achieved a majority vote. However, the '5-person appointment plan' was adopted based on the principle of highest vote count.

In the subsequent voting, three candidates recommended by Koryo Zinc and two candidates recommended by MBK and Youngpoong were elected as directors, respectively.

Consequently, the number of directors from Koryo Zinc's side and MBK and Youngpoong's side will be reorganized from the current '11:4' to '9:5'.

The ranking of the 5 individuals elected by the highest vote count was as follows: the top 3 were candidates recommended by Koryo Zinc, and the 4th and 5th were candidates recommended by MBK and Youngpoong.

Among the candidates recommended by Koryo Zinc, Chairman Choi Yoon-bum was re-elected as an inside director, and attorney Hwang Deok-nam, who currently chairs the Koryo Zinc board, was re-elected as an outside director. Walter Field MacLellan, a director at OneSpaWorld Holdings, proposed by Crucible JV, was newly appointed as a non-standing director.

Among the candidates recommended by MBK and Youngpoong, Choi Yeon-seok, an executive director at MBK, was newly appointed as an outside non-standing director, and Lee Sun-sook, an attorney at Minju Law Firm, was newly appointed as an outside director, successfully entering the board.

Currently, Koryo Zinc's shareholding structure is estimated to be approximately 37.9% for Chairman Choi's side (including friendly shares), 41.1% for MBK and Youngpoong's side, 5.2% for the National Pension Service, and 5% for Hyundai Motor Group. While Chairman Choi's side holds about 17.7% of the shares, they have classified Crucible JV (10.6%), LG Chem (1.9%), and Hanwha Group (7.7%) as friendly shares.

As a result of the shareholders' meeting, the number of directors from MBK and Youngpoong's side on the Koryo Zinc board increased from 4 to 5, and their proportion rose from 26.7% to 35.7%. This is expected to strengthen MBK and Youngpoong's influence within the board, raising the possibility of intensified conflict.

At this shareholders' meeting, proposals put forth by Koryo Zinc, such as the introduction of electronic shareholders' meetings and the appointment and operation of the audit committee, were passed.

Among the shareholder proposals from MBK and Youngpoong, the stock split proposal, the introduction of an executive officer system, and the proposal to change the shareholders' meeting chairperson were rejected. However, a proposal to amend the notice period for board meetings from 'one day prior' to 'three days prior' was passed.

Kim Bo-young, a professor at Hanyang University's College of Business and an existing outside director, was appointed as a member of the Audit Committee.

◇ Tensions at Shareholders' Meeting Venue… "Doubt Cast on MBK's M&A Intentions" vs. "Need to Check Chairman Choi's Unilateral Operations"

During the shareholders' meeting, there were also exchanges of accusations and tensions between the two sides.

One shareholder argued, "It has been over a year since MBK and Youngpoong initiated a hostile M&A of Koryo Zinc. They cited shareholder value enhancement and governance improvement as their goals, but looking at Lotte Card and Homeplus, which they currently manage, I question whether these objectives are truly being met."

A representative for Youngpoong stated, "As the largest shareholder, Youngpoong has respected Koryo Zinc's autonomous management for decades through mutual cooperation. However, since Chairman Choi's inauguration, the board of directors has condoned Chairman Choi's unilateral management and misappropriation of company assets. Directors with independence and expertise distinct from management should be appointed as much as possible."

Delay of the 52nd Koryo Zinc Regular Shareholders' Meeting [Yonhap News]  

Prior to the shareholders' meeting, the re-election of Chairman Choi as a director also drew attention. This was due to some global proxy advisory firms opposing his reappointment and the National Pension Service deciding not to exercise its voting rights on this agenda item. However, with the voting conducted through cumulative voting, Koryo Zinc's side managed to defend the proposal without significant issues.

The market had widely anticipated that MBK and Youngpoong would further solidify their control over Koryo Zinc's board by narrowing the board's structure to '9:6' or even '8:7' through this shareholders' meeting by the end of last year.

However, in December of last year, Koryo Zinc decided to build a non-ferrous metal smelter with the U.S. government and the state of Tennessee, and by allocating a 10.6% stake to the joint venture Crucible JV through a third-party allotment capital increase, the timeline for MBK and Youngpoong to gain control of Koryo Zinc's board was delayed.

Following the shareholders' meeting, MBK released a press statement stating, "The board composition has been reshuffled, narrowing the gap between the first and second largest shareholders to three seats. Although Chairman Choi's side superficially maintained a majority, the board has transitioned to a structure where checks and balances are in operation," attaching significance to the outcome.

Koryo Zinc stated, "This year, with the support of shareholders, we have blocked MBK and Youngpoong's hostile M&A offensive and reaffirmed the support for the current management. We will continue our record-high performance and contribute to strengthening the core mineral supply chain."