[Korea Zinc private equity fund incident] Experts say about the possibility of technology being leaked overseas, “Private equity funds will do whatever it takes to make money…there are no legal sanctions.”

Korea Zinc, Youngpoong, conflicting claims over concerns about overseas leaks
Expert: “Joining hands with private equity funds itself was wrong.”
“Government interest and legal regulation in national key industries”

In the management dispute between Korea Zinc and Youngpoong-MBK Partners, the biggest concern both internally and externally is whether technology will be leaked overseas. Even among experts, there are voices of concern, saying, “Private equity funds are a group that does everything if it makes money,” and “There is nothing we can do if it is sold overseas.” While pointing out the reality that legal measures against companies that have stolen national technology are weak, they emphasize the importance of the technology possessed by Korea Zinc and argue that the government's attention is needed.

According to the industry on the 29th, the possibility has emerged between Korea Zinc and Youngpoong-MBK Partners that if MBK acquires Korea Zinc in the future, it may sell it back overseas, and both sides are continuing to make conflicting claims of 'yes' and 'no'.

Korea Zinc's side claimed, "It is highly likely that (Youngpoong-MBK) will pursue active monetization by selling Korea Zinc's core technologies or sharing technology with overseas countries such as China. Considering MBK's speculative private equity nature of recovering investment, we will sequentially proceed with Korea Zinc's dividends as well as the sale of core assets and personnel restructuring in the future." On the other hand, Youngpoong CEO Kang Seong-du declared at a press conference held on the 27th, "As long as I and MBK Vice Chairman Kim Kwang-il exist, we will never sell the company to overseas countries, including China."

Regarding this, experts are raising the view that Korea Zinc's concerns may come true.

Hwang Yong-sik, a professor of business administration at Sejong University, said, “The fact that MBK has a Chinese stake in itself shows some potential possibility (of going overseas),” and argued, “Due to the nature of private equity funds, they do whatever it takes to make money. Whether it’s national resources, national secrets, or technology, there are no such things.”

He continued, “If you look at Korea Zinc, there are clear signs of solidarity with partners and Hanwha, and there is a strong feeling of being an original partner,” but added, “Private equity funds are a ragtag group in itself. There is a possibility that it can be dangerous because it simply operates based on the logic of capital.”

Wi Jeong-hyeon, a professor of business administration at Chung-Ang University, said, “It was wrong for Youngpoong to join hands with a private equity fund. Mobilizing private equity funds was like a poisoned chalice.” He added, “It is highly likely that MBK requested unfavorable information from Youngpoong, and Youngpoong accepted it,” adding, “After the merger and acquisition is successful, that will become a huge problem.”

Ji Min-hee, a lawyer at Daeryun Law Firm who specializes in corporations, also said, “In fact, when private equity funds buy or sell companies, they do not care about key national industries. Structurally, it is inevitable that it will not be important from their perspective.”

Experts pointed out that there was no way to do anything, especially when concerns became reality. Attorney Ji Min-hee said, "Last year, an amendment to the law to prevent private equity funds from leaking technology was introduced, but I know that it is still difficult to realistically sanction it," and suggested, "And in fact, it is difficult to be punished for this because it is a leak, not a matter of buying and selling a company. This part should be legally revised more thoroughly."

Son Seung-woo, director of the Korea Intellectual Property Research Institute, also said, "In the past, methods such as bringing in engineers from overseas were chosen, but these days, technology is being brought in through M&A. In particular, there are many cases where private equity funds such as MBK take the lead. However, there is no proper way to regulate this." He pointed out, “Korea Zinc is a very important company in terms of economic security as it is leading the way in the zinc and nickel fields, as well as secondary batteries and new and renewable energy. However, it seems that the National Assembly members and the Ministry of Trade, Industry and Energy still lack the awareness to protect it.”

Experts also mentioned problems that may arise during the process of sale, resale, and at least two acquisitions. Jaeyoung Kwon, a professor at Kyung Hee University Law School, argued, "If MBK buys it and sells it later, management rights will be transferred once again. Management rights will change at least twice." He added, "Continuity of management and employment cannot be guaranteed. Even if MBK says they will maintain employment, it is another matter how another company will hire them if it is sold again later."

Professor Kwon also analyzed that this incident will serve as an opportunity to make other blue-chip companies feel a sense of crisis as well. Professor Kwon said, “If Korea Zinc, which has the largest market share in the world, is taken over by a private equity fund, it could send a signal that even companies with a solid market share like Korea Zinc will not be at ease.”

Meanwhile, on the 24th, Korea Zinc applied to the government for a decision on whether the 'patented technology for processing high nickel precursor', a secondary battery material, is a national core technology. If the technology is determined to be a national core technology, the government will have the authority to approve mergers and acquisitions by foreign companies for economic security reasons.

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