MBK Partners and Young Poong have accused the family of Korea Zinc Chairman Choi Yoon-beom of self-dealing ahead of a special shareholders' meeting in September. At the heart of the claim is the assertion that a private equity fund backed by Korea Zinc invested in companies where the chairman's family had already put in money.
MBK and Young Poong disclosed the allegations in a second round of proxy solicitation materials, according to investment banking sources on the 25th. As grounds, they cited criminal trial records of Ji Chang-bae, head of OneAsia Partners, obtained during a shareholder derivative lawsuit against Korea Zinc. According to investigation details by the Seoul Southern District Prosecutors' Office revealed in the records, funds from a Korea Zinc-backed vehicle followed money that the chairman's family had invested earlier in the same companies.
According to MBK and Young Poong, Korea Zinc participated as effectively the sole limited partner in six of the eight funds set up by OneAsia Partners, committing about 560 billion won ($403 million). Of that, a total of 69 billion won was invested across six rounds through OneAsia follow-on funds in three media and entertainment companies, including Arc Media, Hi Hat and Slingshot Studio. In the case of Arc Media, the chairman's side first invested 1.2 billion won in convertible bonds, after which the OneAsia fund invested an additional 29 billion won, MBK and Young Poong said. Hi Hat received capital under a similar structure.
The chairman's side has maintained that Korea Zinc committed to a blind fund at OneAsia — a fund with no predetermined investment targets — and did not take part in the manager's individual investment decisions. But MBK and Young Poong contend that a structure was created in which the family's assets could grow as fund money flowed into companies where the family had invested first.
The allegations came ahead of Korea Zinc's special shareholders' meeting scheduled for the 9th of next month. Citing the disclosed materials, MBK and Young Poong argue that the current audit committee's oversight function is flawed and that an independent audit committee member should be appointed.
