By Hyunjoo Jin and Joyce Lee
SEOUL (Reuters) -The chairman of the board of Korea Zinc vowed on Wednesday to make way for an outsider after the firm dropped a plan to issue new shares worth $1.8 billion that had sparked an investigation by the financial watchdog and a share sell-off.
The world's biggest zinc refiner is bracing for a showdown with rival Young Poong and private equity firm MBK Partners at a shareholder meeting in an escalating takeover battle between members of two founding families of Korea Zinc.
"I will give up the post of the chairman of the board of directors at the earliest date and have an outside director take the post," Yun B. Choi, the chairman of the board, told a news conference.
Choi also holds the position of company chairman, but did not say if he would give up that role as well.
The move is among the steps planned to tackle investor concerns about the firm's corporate governance and shareholder value, such as introducing quarterly dividends and adding rules to protect minority shareholders.
Earlier, after its board met to review the share issue plan, Korea Zinc said in a statement, "We have decided to humbly accept concerns from the market and shareholders."
It added, "Our company will win at a shareholder meeting by putting forward the company's long-term ... vision."
The share sale withdrawal is a setback for Choi, a grandson of the company's co-founder who was seen backing the plan to ward off a takeover attempt by Young Poong and MBK, which have increased their stake to nearly 40% after a tender offer.
Choi and groups friendly to him hold a stake of about 35%.
BOARD BATTLE
In a regulatory filing, Korea Zinc said it had decided not to pursue the share issue in view of investor concerns and regulatory scrutiny.
Its shares closed down 14%, recovering slightly from a fall of as much as 18% after Choi's comments, though they had initially risen 6% on news of the withdrawal.
On Oct. 30, Korea Zinc unveiled its plan to issue new shares equivalent to nearly 20% of its total shares just two days after it bought back stock at a higher price.
South Korea's financial market watchdog launched an investigation to determine if any unfair practice was involved in the decision to issue new shares.
The Financial Supervisory Service (FSS) also put brakes on the plan by ordering the company to revise its stock exchange filing on the issue.
"As the biggest shareholders of Korea Zinc, it is regrettable that Korea Zinc belatedly withdrew the plan only after causing major confusion in the capital market, and inflicting damage on existing shareholders," MBK Partners and Young Poong said in a joint statement.
They asked a court to allow Korea Zinc to hold a special shareholder meeting, which is expected early next year.
They nominated 14 new directors for the firm, which now has 13 board members, to represent more than half the board.
Choi is also expected to nominate new independent directors to woo investors, including the National Pension Service, which holds a stake of more than 5% in the company, said Park Ju-gun, head of corporate analysis firm Leaders Index.