MBK and Golfzon Holdings clash over Golfzon Country sale

A dispute between shareholders over MBK Partners' planned sale of Golfzon Country is edging toward litigation. Golfzon Holdings says the deal breaks the management-control assurances it received when it accepted MBK's investment, while MBK says the sale is simply what the shareholder agreement provides for.

On October 27, MBK signed a share purchase agreement (SPA) to sell control of Golfzon Country to a consortium of The Siena Group and CL Asset Management. On a common-share-converted basis, MBK's side holds 68.4% and Golfzon Holdings 31.6%. MBK is invoking its drag-along right to sell Golfzon Holdings' stake in the same transaction.

In a statement on October 28, Golfzon Holdings said it cannot agree to what it calls a unilateral sale and will take measures, including legal action, to protect its management control and shareholder rights.

The central question: no IPO

The core issue is whether MBK can force Golfzon Holdings to sell when an initial public offering has not taken place. Golfzon Holdings argues it took the investment on the understanding that MBK would complete an IPO and still guarantee its management control when exiting. Selling control without a listing, it says, runs against the original purpose of the partnership.

MBK answered on October 29 that the contract explicitly lets it bundle Golfzon Holdings' shares into a sale to a third party if an IPO fails. It says the management-control guarantee was likewise conditional on a successful IPO. MBK adds that it offered Golfzon Holdings a first chance to buy, but chose The Siena Group's bid because its terms were better than the final price and structure Golfzon Holdings offered.

Lease terms add a second front

The quarrel has spread to leases on four golf courses: Anseong H, Anseong W, Seonun and Cheongtong, owned by subsidiary Golfzon Country Asset Management. Golfzon Holdings calls the terms unfair, citing no separate lease deposit, low rent and a tenant-held right to extend. It says it accepted this to help Golfzon Country grow, but that requests to adjust rent for higher interest rates and operating costs were refused.

MBK replied that the leases were agreed mutually at the time of the investment, and that challenging long-standing contracts only after a bidding contest is not reasonable.

As both sides read the contract differently, the exact wording of the shareholder agreement and the conditions for exercising the drag-along right are likely to decide the outcome.