Korea weighs curbs on private equity in strategic industries after Korea Zinc-MBK battle

Financial Services Commission (FSC) Chairman Lee Eog-weon said Wednesday he will examine possible legislation to regulate private equity firms' takeovers of Korean companies deemed critical to national competitiveness. 

The remarks were widely read as a response to the Homeplus bankruptcy and the ongoing battle for control of Korea Zinc involving MBK Partners, suggesting the FSC is moving toward institutional safeguards for industries considered vital to the public interest.

“We are continuing to monitor the Homeplus rehabilitation proceedings closely. Even as Homeplus remains in receivership, MBK Partners recently held investor briefings in the United States aimed at securing control of Korea Zinc,” Lee told lawmakers at a National Assembly Political Affairs Committee hearing on Wednesday.

“The question is whether we can simply allow private equity firms to take control of companies tied to national infrastructure or people's daily livelihoods.”

Asked directly whether Korea Zinc qualified as a company of national strategic importance, Lee agreed.

Korea Zinc is the world's largest nonferrous metal smelter, producing zinc, lead, silver and a range of strategic minerals, and several of its technologies have been designated as core national technologies. Korea Zinc and the U.S. government are building a $7.4 billion smelter in Tennessee, and through that joint venture, the United States holds a 10.59 percent stake in the Korean firm. 

Lawmaker Gang Jun-hyeon of the ruling Democratic Party cited examples from the United States, Australia and other major economies, arguing that Korea should consider restrictions on private equity ownership or control in sectors with a high degree of public interest, such as telecommunications, health care and water utilities.

“I agree with the underlying goal of strengthening public-interest protections against certain private equity firms that pursue short-term profits,” Lee said. “However, further discussion is needed on the scope of industries to be covered, the form any regulation should take and how it should be codified into law, as well as whether to regulate private equity firms directly or to restrict entry into specific industries."

Since MBK Partners joined forces with Young Poong in September 2024 to launch a tender offer for Korea Zinc, the fight for control of the company has dragged on through shareholder votes, litigation and public relations battles, with no clear resolution in sight.

BY SARAH CHEA   [[email protected]]