*This content was translated by AI.View Original
The eight-year partnership between Golfzon Holdings (Golfzon) and MBK Partners (MBK), South Korea’s largest private equity fund (PEF) operator, is showing signs of strain. The collaboration between the two companies, which joined forces to expand their businesses, is now heading toward a legal dispute as it reaches the stage where MBK seeks to recover its investment (exit).
Market attention is now turning to Yungpoong, another joint investment partner of MBK. Following the Golfzon incident, concerns and interest are simultaneously focused on how the partnership between Yungpoong and MBK will unfold in the future.
According to investment banking (IB) and industry sources on the 5th, Golfzon issued an official statement on the 4th, warning of legal action against MBK’s push to sell its stake in Golfzon County.
Golfzon claimed that “on the 26th of last month, we were in close negotiations with MBK to sign a share purchase agreement (SPA) for Golfzon County, but MBK unilaterally notified us of impossibility one day before the contract.” The company explained that despite confirming they were the sole negotiating party, MBK had been conducting negotiations with other potential acquirers behind the scenes, and it was revealed that on the 28th of last month, MBK agreed to sell its stake to Duesena Group.
In particular, Golfzon emphasized that while the initial investment cooperation was premised on pursuing an initial public offering (IPO) and securing management control over Golfzon County, MBK has ignored these terms and is unilaterally forcing a share sale.
On the other hand, MBK immediately countered with a direct rebuttal based on the contract terms. MBK stated that “the guarantee of management control was premised entirely on the success of the IPO,” and argued that “both companies had already agreed to a drag-along clause allowing for a joint sale to a third party, including Golfzon’s stake, in the event the IPO failed.” Additionally, MBK maintained that before proceeding with an external sale, they first presented acquisition terms to Golfzon for review, and ultimately signed a contract with a new acquirer who proposed more favorable conditions.
The industry is expressing concern over the repeated noise and public disputes emerging across various parts of MBK’s investment portfolio. In fact, MBK has recently found itself at the center of controversy in several investments. Previously, during the Homeplus incident, MBK took a sharp stance against Meritz Financial Group, a key creditor, over issues of funding and responsibility sharing. Recently, Osstem Implant, which was jointly invested in with UCK Partners and others, also came under scrutiny for its acquisition method via leveraged buyout (LBO) and the issue of excessive high dividend payments.
Among these, the management control dispute with Yungpoong over Korea Zinc, which has continued for more than two years, is assessed to be similar to the current Golfzon incident. This is because both cases involve a structure where a financial investor (FI) and a strategic investor (SI) acquired management control stakes in a specific company with a common purpose. In particular, awareness is growing as it is reported that the management cooperation agreement signed between Yungpoong and MBK to secure management control of Korea Zinc contains clauses such as “drag-along” that are very similar to those in the Golfzon contract.
In fact, according to the contract signed by both parties in September 2024 ahead of the public tender offer for Korea Zinc, MBK was granted the right to exercise a call option on a portion of the Korea Zinc shares held by Yungpoong. Additionally, a drag-along clause applies to the remaining shares outside the scope of the option. While Yungpoong is also granted put options and preemptive rights, it is bound by an agreement restricting it from arbitrarily disposing of its Korea Zinc stake to third parties for the next 10 years.
The conditions for exercising these options have previously sparked controversy in the market. In the initial contract between the two sides, the option price was structured to be linked to the public tender offer price. However, on September 25, 2024, the contract was suddenly amended to fix the option price at 700,000 won per share with an annual addition of 5%. But the day after the contract amendment, the Korea Zinc public tender offer price rose from 660,000 won to 750,000 won, and on October 4 of the same year, it surged to 830,000 won. Consequently, criticism has emerged regarding Yungpoong’s decision to abandon the price-linked condition just before the tender offer price increase, thereby missing out entirely on the benefits of the hike.
Furthermore, the contract stipulated that even before the transaction is fully completed, the voting rights for the shares subject to the option would be exercised according to MBK’s will. In the event of successfully securing management control, the design grants MBK not only the right to appoint key executives such as the CEO and Chief Financial Officer (CFO), but also allows it to structure the board of directors with one more member from MBK’s side than from Yungpoong’s. This is a structure where MBK effectively holds complete management dominance even after achieving the common purpose. This explains why some interpret that “compared to Golfzon, which had management control guarantee clauses even if conditional, this Yungpoong contract grants MBK far more unilateral and powerful authority.”
For this reason, some in the industry are concerned that Yungpoong may ultimately become a “second Golfzon.” Currently, Yungpoong is repeatedly emphasizing that this is a normal contract based on business purposes, and MBK has publicly stated it has no plans to exercise its options until it recovers its investment in Korea Zinc. However, it is widely pointed out that it is difficult to fundamentally rule out the possibility of serious conflicts of interest between the two companies when the exit timing arrives in the future.
An investment industry official noted, “Pointers regarding MBK’s repeated reputation risks are continuing among limited partners (LPs), so there is a possibility that MBK may be pushed to recover its investment earlier than expected.” The official added, “While Yungpoong and MBK are currently moving as one team for the immediate goal of securing management control of Korea Zinc, the risk of the same conflicts and legal disputes seen in the Golfzon case being replicated is very high when MBK moves into the stage of executing a full-scale exit strategy.”
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*This content was translated by AI.View Original
