KZ Precision urges disclosure of internal documents amid suspicions over contract amendment in Yeongpoong-MBK Korea Zinc call option deal

*This content was translated by AI.View Original

It was learned on the 30th that KZ Precision has demanded the transparent disclosure of the circumstances surrounding the contract amendment and internal decision-making materials related to suspicions over the call option agreement for Korea Zinc shares between Yeongpoong and MBK Partners. The company stated that Yeongpoong's explanation, which only described certain contract terms while claiming there was no issue, is insufficient to resolve the suspicions.

At the center of the controversy is the management cooperation agreement signed on September 13, 2024, between Yeongpoong and Korean Enterprise Investment Holdings, a special purpose vehicle (SPV) affiliated with MBK. At the time, as both parties initiated a tender offer for Korea Zinc, they established a call option on 2.57 million shares of Korea Zinc held by Yeongpoong. According to KZ Precision, the initial contract included an indexation clause stipulating that the call option exercise price would rise in tandem with any increase in the tender offer price.

However, this indexation condition was abruptly changed one day before the tender offer price was raised. Subsequently, the Korea Zinc tender offer price was increased twice, from an initial 660,000 won to 750,000 won, and finally to 830,000 won. Nevertheless, the call option exercise price was set at a fixed rate of 700,000 won per share plus an annual interest rate of 5%.

KZ Precision pointed out that the contract amendment, which eliminated the price indexation relationship, ultimately worked to Yeongpoong's disadvantage, raising the possibility of breach of fiduciary duty. The company emphasized the need to determine whether management at the time was aware of the potential losses and what the reason was for abandoning the price indexation.

Previously, Yeongpoong issued a statement explaining that the call option exercise price is currently at the level of 770,000 won, calculated by adding an annual rate of 5% to the initial benchmark price of 700,000 won. The company clarified that investment recovery is stable because dividends can continue to be received and a put option has also been established. It further explained that as the investment period lengthens, the exercise price rises, giving it the nature of a long-term investment.

However, KZ Precision rebutted that Yeongpoong's explanation failed to answer the core questions. The company argued that the background behind changing the indexation clause ahead of the tender offer price increase is more important than whether the exercise price rises. Additionally, it raised concerns about the structure of the contract, which allows the option to be exercised within a short period after a certain point in time, with MBK deciding whether and when to exercise it.

As a major listed company, KZ Precision urged the disclosure of the full texts of both the initial management cooperation agreement and the subsequent amendment contract in order to fulfill its responsibilities to shareholders and the market.

Along with this, the company demanded that Yeongpoong present the basis for calculating the call option price, board meeting minutes, external advisory materials, and option valuation results, and clearly identify who made the decision to change to a fixed-price method.

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*This content was translated by AI.View Original