MBK, Golfzon Holdings Clash Over Golfzon County Sale

MBK Partners, the leading shareholder of Golfzon County, South Korea's premier golf course operator, is embroiled in a contentious dispute with Golfzon Holdings, the second-largest shareholder. The source of contention is the proposed sale of Golfzon County, which is set to be acquired by the Siena Group–CL Asset Management consortium. Golfzon Holdings vehemently opposes the sale, threatening legal action against MBK.

MBK maintains that the sale is in line with the shareholders' agreement signed in 2018 when MBK invested in Golfzon County. The critical point of contention is MBK's assertion that it has the right to force Golfzon Holdings to sell its stake alongside its own if certain conditions, such as the failure of an initial public offering (IPO), are met.

MBK argues that the agreement explicitly granted this drag-along right if an IPO did not occur. They assert that Golfzon Holdings willingly signed the agreement, and since the IPO failed, MBK is exercising this right.

MBK dismisses Golfzon Holdings' claim that it has broken a promise to protect its management rights. The company argues that the commitment to protect management rights was contingent upon a successful IPO, which did not transpire. MBK claims it gave Golfzon Holdings ample time to make an offer to acquire Golfzon County before proceeding with a sale through a right of first offer (ROFO) arrangement.

However, MBK claims Golfzon Holdings did not propose concrete acquisition terms and instead preferred pursuing an IPO, which MBK deemed improbable.

In response to the competitive bidding, Golfzon Holdings' proposal was reportedly less advantageous than the Siena consortium's in terms of price and structure. Golfzon Holdings has criticized MBK's unilateral decision to sell the company, alleging it breaches mutual trust. They claim they accepted MBK's investment under the understanding that an IPO would be pursued, and their management rights would be safeguarded.

Golfzon Holdings contends that MBK is violating its agreement and selling the company without their consent. They highlight that they supported Golfzon County's growth by leasing four golf courses to MBK under unfavorable terms, including low rents and no lease deposits. MBK counters that these lease agreements were concluded as per the terms agreed in 2018 and have remained in force as ordinary contractual arrangements.

The transaction values Golfzon County at approximately 1.8 trillion won, or $1.35 billion, based on its enterprise-value. The Siena Group–CL Asset Management consortium plans to acquire 100% of the company through MBK's exercise of the drag-along right. However, Golfzon Holdings is demanding to verify whether the drag-along right was validly exercised and if a sale obligation to its shares has arisen.

This disagreement is expected to complicate the transaction's closing process and might lead to a legal battle, as industry observers anticipate the differing interpretations of the shareholders' agreement to result in such a dispute.