Private equity firm MBK Partners and Young Poong’s envisioned takeover of Korea Zinc would wreak havoc on the world’s biggest zinc refiner’s business in Australia, according to the chief of Ark Energy, an Australian renewable energy arm under Korea Zinc.
“Even if MBK Partners and Young Poong succeed in taking over management control of Korea Zinc, it will not be easy for them to take on the ongoing business in Australia,” Ark Energy CEO Choi Ju-won, also known as Michael Choi, told The Korea Herald in a phone interview held Friday.
Ark Energy is a subsidiary of Sun Metals, Korea Zinc’s refinery business in Australia. It focuses on renewable energy, specializing in wind and solar energy generation to provide the needed electricity for the zinc refinery.
Choi is part of the Choi family who run Korea Zinc. He is also the chief financial officer of Sun Metals.
“Zinc smelting is not a business that can yield short-term profit. It requires long-term investments based on technology and personnel training. MBK Partners is a private equity firm that pursues profit through an exit. How can entities such as MBK and Young Poong do what Korea Zinc has done over the years?” Choi said.
Though MBK said it respects Korea Zinc’s push to expand renewable energy production in Australia in a press conference held Thursday, Choi remains skeptical.
Sharing Choi’s concerns, Australia-based Townsville Enterprise, a peak business development representative group, has called on the Australian government and the Foreign Investment Review Board to block the takeover bid. Sun Metals Zinc Refinery is located in the city of Townsville in North Queensland.
“Local politicians and authorities were shocked over Young Poong executives serving a jail term over a safety-related death. From an Australian perspective, it does not make sense for such an entity to pursue business.”
In August, the chief executive officer of Young Poong and another senior staff member were arrested over a fatal accident last year at the company’s smelter.
“The FIRB may not be able to block the bid itself, but it could take action. For instance, even if the takeover succeeds, MBK and Young Poong are likely to come under tight scrutiny when they apply to renew the operation license (on Australian soil).”
Zinc smelters are categorized as a Major Hazard Facility in Australia and the operation license has to be renewed every three to four years under the control of Workplace Health and Safety Queensland, according to Choi.
Korea Zinc’s business in Australia takes up roughly 10 percent of the total sales of the company, according to the earnings reports. Though the number may seem small, the Australian expansion will be a pivot of Korea Zinc’s future growth, Choi insisted.
“Zinc smelting requires enormous pools of electricity. The big picture is to produce sufficient renewable energy to generate the zinc smelter here. If the production is successful, we will be able to power larger operations and create a virtuous cycle for Korea Zinc and beyond,” Choi said.
On Sept. 13, MBK Partners announced that it will acquire shares in Korea Zinc through a tender offer, aiming to secure a 15 percent stake in the company with a budget of 2 trillion won ($1.5 billion).
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