Korea Zinc's 'fund disbursement verification' argument gains support from KCGS, giving MBK a boost [Financial News]

[Financial News] Ahead of Korea Zinc's extraordinary shareholders' meeting on Sept. 9, the argument raised by Youngpoong Corporation and MBK Partners for the need for an independent audit is gaining traction. The Korea Institute of Corporate Governance and Sustainability (KCGS), a leading domestic proxy advisory firm, recommended voting in favor of Park Yoo-kyung, the audit committee candidate backed by Youngpoong Corporation and MBK, and against Baek In-kyu, the candidate backed by Korea Zinc.
In particular, KCGS drew attention by classifying the One Asia Fund investment, the acquisition of Igneo Holdings LLC, and the large-scale rights offering as key governance issues that Youngpoong Corporation and MBK had previously raised. By placing greater weight on the audit function's independence from management than on the candidates' accounting expertise, the decision is also seen as lending legitimacy to MBK's position.
According to the investment banking industry on the 30th, KCGS said in a recent report analyzing Korea Zinc's extraordinary shareholders' meeting agenda that it supported Park, the independent director nominated by Youngpoong Corporation and MBK to become an audit committee member on Sept. 9, and recommended voting against Baek, the candidate nominated by Korea Zinc.
KCGS viewed the One Asia Fund, Igneo Holdings LLC, and the large rights offering not as simple accounting matters, but as governance issues that require scrutiny of how company funds were used and whether management had conflicts of interest.
It also questioned the watchdog role of the current audit committee. The reason, it said, was that existing audit committee members approved the rights offering despite concerns that shareholder interests could be harmed, and took the position of waiting for the outcome of external procedures even when independent investigations into One Asia Partners and Igneo Holdings LLC were requested.
That reasoning closely matches the argument MBK has made so far. During the management control dispute, Youngpoong Corporation and MBK have pointed to Korea Zinc's past investments and fund disbursements as issues and have demanded verification through audit committee members independent from management.
KCGS also raised concerns about Baek's independence. The basis was that Deloitte Korea, where Baek previously worked, participated in financial due diligence for major strategic projects at Korea Zinc. By contrast, Park was viewed more favorably for experience at a global asset manager, where he analyzed portfolio companies' financial performance and capital deployment and handled responsible investment and corporate governance work.
In the investment banking industry, attention is now on whether this recommendation will alter the trend in which global proxy advisers had opposed the candidates backed by Youngpoong Corporation and MBK. In particular, because audit committee members are elected separately and the 3% rule applies, institutional investors' decisions are expected to carry significant weight in the actual vote.
One investment banking industry source said, "What matters is not which candidate KCGS supported or chose, but that it placed weight on the need to independently verify Korea Zinc's past fund disbursements." The source added, "For MBK, this effectively restores the rationale for its governance reform argument after the global advisers' negative recommendations."
Meanwhile, KCGS also recommended voting in favor of independent director candidates Lee Jun-bong and Shim Hye-seop, who were nominated by Youngpoong Corporation and MBK. It also supported a proposed articles amendment to expand the number of separately elected audit committee members.
As a result, the extraordinary shareholders' meeting on Sept. 9 is expected to become a vote on whether to establish an audit body that can independently verify Korea Zinc's past investments and fund disbursements. Youngpoong Corporation and MBK, which had been on the defensive after negative recommendations from global advisers, may regain momentum in persuading institutional investors following KCGS's assessment.

[email protected] Kim Kyung-a Reporter