Young Poong (000670) and MBK Partners have accused Korea Zinc (010130) Chairman Choi Yoon-birm of front-running an investment and breaching his fiduciary duty. Korea Zinc gained the upper hand at an extraordinary shareholders meeting last month, but the conflict has reignited over investments made by One Asia Partners, a fund manager Korea Zinc backed as an investor. Korea Zinc dismissed the allegations, saying its rivals should "stop repeating baseless claims."
Young Poong and MBK said on the 12th that "it has been confirmed that during the two months in which Chairman Choi invested in Arc Media and 25 billion won of Korea Zinc funds was committed, seven people in an inner circle, including acquaintances of Chairman Choi, took part in a third-party allotment." They described the transactions as "a pre-planned breach of fiduciary duty in which Chairman Choi and his associates secured stakes in advance after identifying where Korea Zinc money was headed."
According to Young Poong and MBK, Korea Zinc on May 12, 2020 committed 23.659 billion won to the Korea Growth No. 1 fund managed by One Asia Partners. Korea Zinc's contribution accounted for 94.64% of the 25 billion won the fund had sought for its investment in Arc Media.
Seventeen days after the money arrived at the fund, on May 29, Choi personally acquired 1.7 billion won of Arc Media's first convertible bond issue. On June 5, seven people including acquaintances of Choi took part in a third-party allotment by Arc Media, receiving new shares at 5,000 won each. On the same day, One Asia Partners Chief Executive Ji Chang-bae was appointed an inside director of Arc Media.
The Korea Growth No. 1 fund then acquired 25 billion won of Arc Media's second convertible bond issue on July 10. In the 59 days between Korea Zinc's commitment to the fund and the actual execution of the investment, Choi and his associates had already acquired their stakes. Young Poong and MBK contend that these investments amounted to a pre-planned breach of fiduciary duty using undisclosed information.
An official at Young Poong and MBK said there would have been no reason for Choi and his closest associates to line up to take stakes in a one-month-old drama production startup with no track record unless they had known in advance that 25 billion won, including Korea Zinc funds, would be committed and that the company's value would jump. The official added that one of the seven close associates who took part in the early Arc Media share sale was appointed the following year as an outside director and audit committee member of Korea Zinc.
Korea Zinc countered that Young Poong and MBK are repeating the same allegations without evidence. The company said its rivals are "packaging assumptions piled on assumptions as if they were newly confirmed facts and mobilizing inflammatory language to frame our investment activity negatively." It added that they are "distorting the facts, as if Korea Zinc itself managed the fund and decided the individual investment targets, the timing and the disbursement of funds."
The company said it "participated as a limited partner in a fund managed by One Asia Partners, and the fund's specific investment plans and execution are led by the general partner through investment review and due diligence." It added that "to argue that Korea Zinc deliberately parked company money for the benefit of a particular individual, while ignoring even this basic fund structure, is nothing more than dressing up arbitrary assumptions as fact."
Korea Zinc said it will "continue to provide accurate information to shareholders and the market based on objective facts," and stressed that it will "respond firmly, including through legal action, to conduct that damages the reputation of the company and its management and undermines corporate and shareholder value through unverified allegations and arbitrary assumptions."