Korea Zinc Files a FSS Complaint, Urging Investigation into MBK’s Potential Violation of NDA and Capital Markets Act

Korea Zinc (KRX:010130) filed a complaint with the Financial Supervisory Service (FSS) on December 15, calling for an investigation into potential violation of a non-disclosure agreement (NDA) and the use of non-public information by MBK Partners. Korea Zinc suspects that MBK used confidential information shared under NDA in the past – a 112-page document outlining the company’s Troika Drive strategy and a forecast of Korea Zinc’s valuation – in launching the hostile M&A, seriously destabilizing the market and causing trading disruptions. Korea Zinc argues that a comprehensive inspection of MBK’s potential breach of the Financial Investment Services and Capital Markets Act (FSCMA) is necessary.

The complaint requests an investigation into key individuals within MBK and affiliated parties, including Chairman Michael ByungJu Kim, MBK Partners LLC, MBK Partners Special Situations Ltd. and MBK Partners HK Limited.

Korea Zinc listed these individuals as “unnamed persons” in the petition, explaining that the term covers all those involved in making decisions, issuing orders, or executing unlawful acts on MBK’s behalf.

Korea Zinc specifically pointed to Vice Chairman Kim Kwangil, who led the tender offer with the Young Poong advisor Jang Hyung-jin; Bryan Byungsuk Min, Partner and COO at MBK HK, who signed the NDA; Vice Chairman Jay H. Bu, Head of Special Situations division; and Chairman Michael ByungjJu Kim, the key decision maker at MBK.

While multiple media outlets have raised concrete allegations against MBK in recent weeks, MBK’s defense has been deemed insufficient, prompting Korea Zinc to call for a thorough FSS investigation to set the facts straight.

Korea Zinc believes that MBK may have violated Article 174 of the FSCMA, which prohibits the use of non-public information. The Supreme Court of Korea defines such information as internal data that may have a significant impact on the investment judgment of investors, such as the management, property status or business performance of a listed company, before it becomes publicly available to an unspecified audience.

The confidential materials provided by Korea Zinc include strategy for the company’s future growth engine, the Troika Drive, in addition to projections of Korea Zinc’s value, none of which has been disclosed to public.

Unlike what has been publicly disclosed through the company website and IR materials, and reported in the media, which only provides a broad overview of the document shared under NDA, the expansive 112-page document shared under NDA contained detailed information pertaining to the Troika Drive’s investment plans, business plans, growth projections, anticipated revenues, and projected company value. These critical data, including specific figures, may have played a decisive role in MBK’s decision to launch the hostile M&A and set the tender offer price. Specifically, Korea Zinc believes MBK may have leveraged this information to determine Korea Zinc’s maximum (fair) price per share and overall corporate value.

Legal experts believe that the information in question constitutes key undisclosed data as defined under the FSCMA, as it could significantly impact investment decisions.

MBK previously claimed that its “Chinese wall” mechanism prevented information-sharing between its Special Situations division, which received the confidential information, and the Buyout division, which is leading the hostile M&A. However, a careful analysis of publicly available information has confirmed that MBK’s past acquisitions such as Japan’s Accordia Golf Co., Ltd. and China’s CAR Inc. were jointly pursued by both divisions, undermining their defense.

Additionally, MBK's clarification during the complaint process raises further concerns. The company admitted that its compliance team reviewed and approved materials provided by Korea Zinc. This statement implies that MBK still possess the confidential information shared under NDA. Furthermore, it effortlessly acknowledges that with compliance team's approval, such confidential information could be utilized across other business units, effectively negating the “Chinese Wall” altogether.

Korea Zinc has also requested a comprehensive inspection of MBK’s business practices and financial status. The company believes MBK’s actions potentially violate Article 54 of the FSCMA, which prohibits the misuse of work-related information. Article 249-14, Paragraph 13 of the FSCMA permits investigations into the operations and financial conditions of private placement funds when necessary to ensure market stability and maintain sound trading practices.

Considering MBK’s status as Asia’s largest private equity fund, legal experts argue that using confidential information for tender offers should not be treated merely as a breach of contract between private parties. Instead, it constitutes a significant violation that undermines the fairness and integrity of financial markets. Experts warn that such actions could erode transparency, discourage long-term investments by foreign investors, and deter companies seeking funding – ultimately stifling the growth potential of financial markets and related industries.

In light of these concerns, Korea Zinc strongly urges the FSS to conduct a thorough investigation into MBK's alleged violations and hold them accountable by clearly identifying the responsible parties.

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