Young Poong, MBK: "Put and call options are part of a normal contract," rebut breach-of-trust allegations

Young Poong and MBK Rebut Claims by Korea Zinc Director Choi Yoon-beom’s Side

“Maliciously Cherry-Picking and Distorting the Contract’s Terms”

Young Poong and MBK Partners pushed back on October 28 against claims by Choi Yoon-beom, an inside director of Korea Zinc, that the call-option clause in the management cooperation agreement between Young Poong and MBK Partners posed a “risk of loss” and a “possibility of breach of trust.” Young Poong and MBK (hereinafter “MBK”) called Choi’s claims “a typical smear campaign that maliciously cherry-picks and distorts the essence of the agreement.”

Young Poong·MBK: “We also hold a put option on equal terms... The exercise price rises every year”

According to MBK, the agreement includes not only MBK’s call option (the right to demand the purchase of shares) but also a put option (the right to demand the sale of shares) allowing Young Poong to sell its shares using the same pricing formula. MBK said it had “a reliable downside protection mechanism that allows it to recover its investment principal stably by selling its stake at the agreed price,” and stated that the claim that the agreement exposed the company to one-sided risk of loss was unfounded.

MBK also challenged a simple comparison between the initial reference price of 700,000 won and the current market price. “The option exercise price is not fixed at 700,000 won; it is structured to increase each year by 5%, or 35,000 won per share, in guaranteed interest,” MBK said, adding that “now, two years later, the option exercise price has already reached 770,000 won per share.” It added that all dividends per share accrued before the options are exercised will go to Young Poong.

MBK also noted that the options cover only part of Young Poong’s stake, not its entire holding. It said Young Poong can retain the remaining shares and continue to benefit from any increase in Korea Zinc’s corporate value. MBK further said that the shares would not be automatically transferred just because two years had passed since the agreement was signed, adding that “the options cannot be exercised at all until MBK has exited its investment in Korea Zinc.” It added, “Invoking breach of trust on the basis of hypothetical losses that have not even materialized is nothing more than sophistry that disregards the principles of capital markets law.”

MBK said the management cooperation agreement was “a decision made to restore the governance of Korea Zinc, which has been undermined by Choi Yoon-beom’s side, and to ensure that Young Poong can continue its business.”

Young Poong·MBK: “Choi is the one who caused losses to Korea Zinc”

MBK instead questioned Choi’s management decisions. “The person causing serious financial losses and legal risks to Korea Zinc is none other than Director Choi Yoon-beom,” MBK said.

Regarding Korea Zinc’s tender offer for its own shares, MBK claimed that Choi “carried out the tender offer by raising 1.6 trillion won in debt, leaving Korea Zinc, which had previously had no debt, with liabilities of the same amount.” Comparing this with Choi’s side having financed a competing tender offer for KJ Precision with family funds, MBK said, “The cost of defending management control was paid for with company funds.”

MBK also criticized Choi over allegations that he privately misused company funds. It claimed that “790 billion won in Korea Zinc funds flowed to newly established entertainment companies in which he had personally invested first, after which he withdrew his investment and walked away.” MBK added, “The losses from the entertainment companies that fell into financial trouble were left with Korea Zinc.”

MBK said, “Authorities are reportedly investigating the matter on suspicion of breach of trust,” adding, “We will firmly respond to the conduct of a person under investigation for clear criminal allegations who distorts a legitimate contract to mislead public opinion, and will pursue legal accountability to the end.”

This content was produced with the assistance of AI translation services.