The two longtime business partners settled on an unusual division of power 50 years ago when they set up a subsidiary to manufacture zinc from an industrial park set up by the South Korean government.
The new venture, Korea Zinc, will be run by the Choi family. The existing parent company, Yongpun, will be managed by the Chang family, the other founding family. Both clans agreed to respect each other's management. This arrangement became known as “two families under one roof.”
Korea Zinc became the world's largest zinc producer and an important cog in the Korean economy.
But now, the relationship between Mr. and Mrs. Cho and Mr. and Mrs. Jang has collapsed in a dramatic way. The descendants of the two founders who died decades ago are locked in a hand-to-hand battle for control of Korean Zinc.
The feud has broader implications for South Korea's biggest companies, testing whether powerful family-run conglomerates known as chaebols can coexist with Western-style corporate governance. At the center of the fight is a geopolitically important company that is one of the few companies without ties to China that supplies vital metals to global supply chains.
At Thursday's shareholder meeting, the Choi family will retain control of Korea Zinc, seeking to fend off a takeover attempt by Yongpoon, which is still controlled by the Jang family. Young Poong operates a bookstore chain, an electronic parts manufacturer, and its own zinc refining business.
Yong Poong has teamed up with MBK Partners, one of Asia's largest private equity firms, to oust Korea Zinc chairman Yoon B. Choi, the founder's grandson. The consortium accuses Choi of poor management, making questionable investments and not doing enough to keep the company competitive.
Korea Zinc said the Jang family's takeover offer was an attempt by Yongpoon to strengthen its sluggish zinc business. There are also growing concerns that Korean zinc could fall into Chinese hands, as private equity funds have ties to China through investments.
Corporate drama is unfolding at a delicate time for South Korea. The country's President Yoon Seok-yul was impeached after declaring martial law last month. The political crisis has disrupted the economy, damaged the currency and damaged business confidence.
Choi acknowledged that the business battles may make some foreign investors wary of South Korea. “It's definitely a chaotic environment,” he says.
The dispute over control of Korea Zinc is hurting the chaebols that are the foundation of South Korea's economy. Many chaebols are run by founding families and supported by corporate boards whose interests are reliably aligned.
“This is just the tip of the iceberg,” said Choi Seong-ho, a finance and real estate asset management professor at Kyunggi University who is not related to the families involved in the conflict. “This is sending a signal to these large companies that such acquisitions are possible.”
The intertwined history of the two families dates back to 1949, when Jang Byung-hee and Choi Ki-ho founded Yongpung. It began shipping, mining, and trading operations before opening the nation's first facility to extract zinc metal from ore. Korea Zinc was established as a subsidiary in 1974.
The fractional ownership arrangement lasted for 50 years. Both parties agreed to a contract stipulating that important decisions affecting the other party's property rights required mutual consent.
According to Yong Poong, Korea Zinc began violating the agreement when power was transferred to Choi, a Columbia University lawyer who works at the New York law firm Cravath, Swain & Moore. After that. He oversaw the turnaround of Korea Zinc's Australian operations, becoming chief executive in 2019 and chairman in 2022.
Yongpoon said Choi took steps to dilute the Jang family's stake by issuing shares to companies friendly to Korea Zinc's current management.
“I realized that it was probably best for us to separate,” Choi told reporters this month.
The dispute escalated quickly. Mr. Yongpoon opposed two proposals by Korea Zinc at last year's shareholders' meeting. Korea Zinc declined to renew the long-standing deal and took control of the board of jointly owned sales and marketing subsidiary Sorin.
In preparation for the showdown, Yong Poong partnered with MBK Partners, a Seoul-based private equity fund that manages $31 billion in investor funds.
MBK was founded by South Korean-born, US-educated investor and billionaire Michael Byung-joo Kim, who in 2020 published a loose autobiography about a young banker who becomes entangled in a powerful chaebol family. published a novel.
MBK has a history of challenging the establishment of Korean companies, including launching a takeover bid in 2023 to remove the chairman of Hankook, the parent company of South Korea's largest tire maker. Management rights could not be secured. In this case, MBK claimed that Yongpoong was brought in as a “white knight.”
In September, Young Poong and MBK announced a tender offer for Korea Zinc's shares, relinquishing bids twice in the process. Korea Zinc, which opposed the proposal, responded by buying back some of its own shares, but a week later announced plans to issue new shares to investors at a significantly lower price.
The company's stock price plummeted, infuriating shareholders and attracting the attention of regulators concerned about the lack of disclosure. The company withdrew its publication.
After apologizing, Choi said he would step down as chairman after the shareholders' meeting, but would remain CEO of Korea Zinc. He called the stock issuance plan “not the wisest decision.”
Kim Kwang-il, a partner at MBK, which is leading the Korean zinc deal, said the Korean Zinc board is “trying to protect Chairman Choi's control at the expense of all shareholders.”
At the general meeting of shareholders, both parties propose director candidates. Mr. Yongpoong and Mr. MBK hold 47% of the voting shares, while Mr. Choi and his allies have about 40%.
Korea Zinc hopes independent shareholders will choose the company's track record and continuity to ensure the company can execute on its plans, which include opening next year the largest nickel refinery outside of China. are.
MBK and Young Poong said they have no interest in running Korea Zinc on a day-to-day basis. They plan to hand over the company to the current management team, but Mr. Choi will not take over.
Jang Se-hwan, vice chairman and grandson of Yongpung's founder, said, “If the CEO loses the trust of the largest shareholder, the company will not be able to achieve stability or conduct proper management.''
The battle was fierce. MBK accused Choi of nepotism over the $380 million investment Korea Zinc made in a private equity fund run by a former classmate. Choi said the investment is generating “decent returns.”
Korea Zinc called Yong-poong and MBK's actions a “hostile takeover,” even though Yong-poong has owned one-third of the company for decades. Concerns about China are at the core of Korean Zinc's defense.
In a December letter to the U.S. State Department, Democratic Rep. Eric Swalwell of California said MBK is working to “isolate and expand the supply chain of critical minerals from Chinese influence” in the U.S. and South Korea. expressed concern that it could damage the
Robert O'Brien, who served as national security adviser in the first Trump administration and is currently chairman of American Global Strategies, an advisory firm with overseas clients, issued a letter on January 16, saying, He said the acquisition would give the Chinese government access to Korean zinc and could potentially expand the Chinese zinc market. Important minerals predominate. This letter was immediately promoted by Korea Zinc.
Kim, whose MBK partner is leading the deal, said the company's Chinese investors accounted for about 5% of the funding. He declined to identify the investors, but said he had no influence. He said the concerns were “totally unfounded.”
Choi had hoped for a “more amicable” breakup, but admitted it was difficult to take the conflict personally.
“It's important to me that it was my grandfather who founded the company and my father who dedicated his life to this company,” he said.
“I had mixed feelings,” Chan said. He respected and worked closely with Choi's father, who also officiated at the wedding. However, he said he has concerns about the way Choi is managing the company.
“In South Korea, it is common for people to own 15 to 20 percent of a company and run it as if it were their personal property,” he said. “The moment you think that way, the company is doomed to collapse.”
