When two longtime business partners established a subsidiary 50 years ago to make zinc out of an industrial complex set up by South Korea’s government, they settled on an unusual division of power.
The new venture, Korea Zinc, would be managed by the Choi family. The existing parent company, Young Poong, would be run by the other founder’s household, the Chang family. Both clans agreed to respect each other’s management. The arrangement came to be known as “two families under one roof.”
Korea Zinc went on to become the world’s largest producer of zinc and an essential cog of South Korea’s economy.
But now the relationship between the Chois and the Changs has broken down in dramatic fashion. The descendants of the two founders, who died decades ago, are locked in a bare-knuckle fight for control of Korea Zinc.
The feud has broader implications for South Korea’s biggest companies, testing whether the powerful family-run conglomerates, known as chaebols, can coexist with Western-style corporate governance. At the center of the battle is a company of great geopolitical significance, one of the few suppliers of metals critical to global supply chains without ties to China.
At a shareholder meeting on Thursday, the Choi family will seek to retain management rights for Korea Zinc and fend off a takeover attempt by Young Poong, still controlled by the Chang family. Young Poong has its own zinc-refining business as well as a bookstore chain and electronics components makers.
Young Poong has partnered with MBK Partners, one of Asia’s biggest private equity firms, in its bid to oust Korea Zinc’s chairman, Yun B. Choi, who is the founder’s grandson. The consortium has accused Mr. Choi of being a poor manager, making questionable investments and not doing enough to maintain the company’s competitiveness.
Korea Zinc has said the Chang family’s takeover bid is an attempt by Young Poong to bolster its flagging zinc operations. It has also stoked concerns that Korea Zinc may fall into Chinese hands, because of the private equity fund’s ties to China through its investments.
The corporate drama is playing out at a delicate time for South Korea. The country’s president, Yoon Suk Yeol, was impeached after declaring martial law last month. The political crisis has roiled the economy, undermined the currency and damaged business confidence.
Mr. Choi acknowledged that the corporate fight could make some foreign investors wary of South Korea. “It’s definitely a chaotic environment,” he said.
The battle for control of Korea Zinc strikes at a foundation of the country’s economy: the chaebol. Many chaebols are run by their founding families, backed by corporate boards who reliably fall in line with their interests.
“This is the tip of the iceberg,” said Choi Sung-ho, a professor of financial and real estate asset management at Kyonggi University not related to the family involved in the dispute. “It does signal to these big companies that such takeovers are possible.”
The two families’ intertwined history traces to 1949, when Chang Byung-hee and Choi Ki-ho started Young Poong. It began shipping, mining and trading businesses before it opened the country’s first facility to extract zinc metal from ores. In 1974, it established Korea Zinc as a subsidiary.
The split ownership arrangement endured for five decades. The two sides agreed to a contract stipulating that major decisions affecting the other’s ownership would require mutual consent.
According to Young Poong, Korea Zinc started to violate this agreement when power transferred to Mr. Choi, a Columbia University-educated lawyer who worked at the New York law firm Cravath, Swaine & Moore. He oversaw the turnaround of Korea Zinc’s Australia operations before becoming chief executive in 2019 and chairman in 2022.
Young Poong said Mr. Choi took steps to dilute the Chang family’s stake by issuing shares to companies friendly to Korea Zinc’s current management.
“I came to realize that it was probably best to part ways,” Mr. Choi told reporters this month.
The dispute escalated quickly. Young Poong opposed two of Korea Zinc’s proposals at last year’s shareholder meeting. Korea Zinc refused to renew a longstanding business deal and it seized board control at Sorin Corp., a jointly owned sales and marketing subsidiary.
Bracing for a showdown, Young Poong partnered with MBK Partners, a Seoul-based private equity fund that manages $31 billion in investor money.
MBK was founded by the billionaire Michael ByungJu Kim, a South Korean-born, U.S.-educated financier who published a loosely-autobiographical novel in 2020 about a young banker who becomes enmeshed with powerful chaebol families.
MBK has a history of challenging South Korea’s corporate establishment, launching a takeover bid in 2023 to oust the chairman of Hankook, the parent company of South Korea’s largest tire maker. It failed to secure a controlling stake. In this case, MBK said it was brought in as a “white knight” by Young Poong.
In September, Young Poong and MBK announced a tender offer for Korea Zinc shares, sweetening its bid twice in the process. Korea Zinc, which opposed the offer, countered by buying back some of its shares, but a week later announced plans to issue new shares to investors at a much lower price.
Its stock price tumbled, infuriating shareholders and catching the attention of regulators concerned about a lack of disclosure. The company withdrew the issuance.
After apologizing, Mr. Choi said he would step down as chairman following the shareholder meeting but remain Korea Zinc’s chief executive. He called the share issuance plan “not the wisest of decisions.”
A partner at MBK who is leading the Korea Zinc deal, Kim Kwang Il, said that the Korea Zinc board was “trying to protect Chairman Choi’s control at the cost of all the shareholders.”
At the shareholder meeting, each side is proposing a slate of directors. Young Poong and MBK hold 47 percent of the voting shares, compared with around 40 percent for Mr. Choi and his allies.
Korea Zinc is hoping independent shareholders will choose its track record and continuity to ensure the company carries out plans such as opening a nickel refinery, the largest by a non-Chinese company, next year.
MBK and Young Poong said they were not interested in running Korea Zinc day to day. They plan to turn over the company to current executives, but not Mr. Choi.
“A company cannot achieve stability or engage in proper management if the C.E.O. lacks the confidence of its largest shareholder,” said Chang Se-hwan, Young Poong’s vice chairman and its founder’s grandson.
The fight has turned fierce. MBK has accused Mr. Choi of cronyism for a $380 million investment made by Korea Zinc into a private equity fund run by his old classmate. Mr. Choi said the investment was producing “decent returns.”
Korea Zinc has called Young Poong and MBK’s actions a “hostile takeover,” even though Young Poong has owned one-third of the company for decades. Fears about China are core to Korea Zinc’s defense.
In a December letter to the U.S. State Department, Representative Eric Swalwell, a Democrat from California, expressed concerns that MBK might hurt American and South Korean efforts “to insulate and expand critical minerals supply chains” from Chinese influence.
Robert O’Brien, a national security adviser during the first Trump administration who is now chairman of American Global Strategies, an advisory firm with overseas clients, issued a letter on Jan. 16 stating the takeover could allow Beijing access to Korea Zinc and expand China’s dominance in critical minerals. The letter was quickly promoted by Korea Zinc.
Mr. Kim, the MBK partner leading the deal, said the firm’s Chinese investor accounts for about 5 percent of its fund. He declined to identify the investor, but he said they had no influence. He called the concerns “totally groundless.”
Mr. Choi said he wanted a “more amicable” parting, but admitted that it was hard not to take the dispute personally.
“It matters to me that it was my grandfather who founded the company and it was my father who put his life into this company,” he said.
Mr. Chang said he had “mixed feelings.” He respected and worked closely with Mr. Choi’s father, who also served as the officiant at his wedding. However, he said he was concerned with the way Mr. Choi ran the company.
“In Korea, it’s common practice for people to own 15 to 20 percent of a company and run it as if it is their individual asset,” he said. “The moment you think that way, a company is destined for failure.”