MBK's Tender Offer for Korea Zinc: Key Legal Insights and Implications
What is a Tender Offer?
- A tender offer is a system where a party acquires a significant number of shares from multiple shareholders of a listed company to obtain management control. Under Article 134 of the Financial Investment Services and Capital Markets Act (FSCMA), tender offerors must publicly announce their offer and submit a tender offer statement to the Financial Services Commission and the stock exchange.
- MBK's recent tender offer for Korea Zinc serves as a notable example of how this system is applied in practice.
MBK’s Tender Offer Terms and Comparison to HYBE’s SM Case
- MBK specified the tender offer price at 660,000 KRW per share and set the minimum purchase quantity at 6.98% of the total issued shares. This conditional tender offer ensures that the offeror can withdraw if the minimum purchase requirement is not met.
- In contrast, during HYBE’s tender offer for SM Entertainment, no such condition was established. Despite a significant increase in SM's stock price due to competing offers, HYBE had to purchase all shares tendered, resulting in substantial losses.
Impact of Competing Offers and Stock Price Volatility
- Korea Zinc’s current stock price (735,000 KRW) exceeds MBK’s tender offer price (660,000 KRW), reflecting market speculation about a potential competing tender offer. If a competing offer emerges, stock prices often rise to levels comparable to or higher than the tender offer price, increasing volatility in the market.
- If MBK fails to meet the minimum purchase threshold or decides to withdraw due to a sharp increase in Korea Zinc’s stock price, they can legally cancel the tender offer under Article 139 of the FSCMA. However, existing shareholders would not be entitled to seek damages or penalties against MBK in such a case.
Legal Effects of Tender Offer Withdrawal
- Should MBK’s tender offer be withdrawn or fail to meet its minimum purchase condition, the company is not obligated to proceed with the acquisition. Shareholders are left with no legal recourse to claim compensation for the failed tender offer.
- Conversely, if MBK raises the tender offer price through an amended filing to meet market expectations, Korea Zinc’s stock price could see further increases during the tender period.
Conclusion: Caution for Individual Investors
- During the tender offer period (September 13, 2024 – October 4, 2024), Korea Zinc’s stock price is expected to experience significant volatility due to factors such as competing offers and adjustments to the tender price.
- Individual investors are advised to carefully evaluate the risks and opportunities before making investment decisions in this highly dynamic environment.
- MBK’s tender offer highlights critical legal and financial considerations in tender offers, providing valuable insights for future cases in the market.
