Korea Zinc’s acquisition of Igneo grants sellers profit of 100 times initial investment

Kim Kwang-il, a partner at MBK Partners, speaks during a press conference at Lotte Hotel Seoul, Dec. 10, 2024. Courtesy of MBK Partners

Questionable acquisition demonstrates nonfunctional board of directors under chairman Choi, MBK claims

By Jun Ji-hye

An alliance of private equity firm MBK Partners and Young Poong demanded clarification on the relationship between Korea Zinc Chairman Choi Yoon-beom and early investors of Igneo Holdings, saying that these investors sold their shares to the zinc smelter in 2022 and made returns exceeding 100 times their initial investment.

The MBK-Young Poong alliance is Korea Zinc’s largest shareholder and is currently engaged in a fierce battle with Choi to gain the management rights of the world’s largest zinc smelter.

MBK said on Monday that this questionable acquisition is one of the examples demonstrating that the board of directors under Choi has been failing to function properly.

“When Korea Zinc acquired Igneo in 2022, it set an absurd valuation for the company that had only recently been established, without proper due diligence, resulting in sellers making an extraordinary profit of up to 100 times their investment,” an MBK official said.

“Given the unusual and highly irrational nature of the investment, the relationship between the sellers and Choi must be fully disclosed to the shareholders.”

Igneo, a U.S.-based electronic waste recycling company, was established in February 2021.

Korea Zinc used the funds invested in its U.S. subsidiary, Pedalpoint Holdings, which was established in 2022, to acquire 100 percent of Igneo’s existing shares and new shares in two transactions, one in July and another in November of the same year.

The total acquisition price for Igneo, including the $300 million for the existing shares, amounted to approximately 580 billion won ($394 million).

MBK said that Korea Zinc overvalued the newly established company.

In 2021, the year Igneo was founded, the company’s revenue was about 60 billion won, and its total equity stood at minus 1.9 billion won, indicating a state of complete capital impairment.

The initial investment capital was around $2.75 million. The acquisition price for the existing shares — $300 million — was more than 100 times the company’s capital at the time of its founding.

According to MBK, Korea Zinc began negotiations after signing a nondisclosure agreement in July 2021, just five months after Igneo was established, ultimately deciding to invest in the company.

“The fact that acquisition negotiations were conducted at a price more than 100 times the initial capital of the company is highly unusual when compared to typical merger and acquisition (M&A) transactions,” the MBK official said.

The early shareholders of Igneo made a profit of more than 100 times their investment through the sale of shares to Korea Zinc.

At the time of the transaction, the sellers included MCC NFT, the largest shareholder with a 47.5 percent stake, as well as investment funds such as Windchime Limited with a 5 percent stake, PCT Igneo Investor with a 38.2 percent stake and The Tarsadia Group with a 5.7 percent stake.

“Choi’s side claims to be unaware of the relationships among the Igneo sellers, but there is no case where the identities of the parties involved in a multibillion-won M&A transaction are disregarded,” the MBK officials said.

“The connections between MCC NFT and Tarsadia, as well as the identities of the actual investors behind the investment funds operated by Tarsadia, must be thoroughly clarified.”

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