[Alpha Biz= Paul Lee] The Japanese government’s intervention in a proposed acquisition by MBK Partners has reignited controversy over the nature of capital used in a fund previously deployed in a tender offer for Korea Zinc.

According to investment banking sources on May 10, Japan’s Ministry of Finance and the Ministry of Economy, Trade and Industry on April 23 recommended that MM Holdings—a special purpose vehicle established by MBK—halt its planned share acquisition of Makino Milling Machine Co., Ltd.. Machine tools are widely used in automotive and industrial equipment manufacturing, but can also be applied in the production of military equipment, prompting Japanese authorities to view the transaction as a matter of national security rather than a routine corporate acquisition.

The issue has spilled over into South Korea, particularly in relation to MBK’s prior attempt to acquire Korea Zinc in partnership with Young Poong. The buyout was reportedly backed by MBK’s Fund VI, the same vehicle said to have been considered for the Makino deal. Korea Zinc plays a critical role in the supply chain of key minerals such as zinc and nickel, and some of its technologies are designated as national core technologies.

Korea Zinc and some political figures have raised concerns that funds containing Chinese capital should be carefully scrutinized when pursuing acquisitions involving companies with sensitive technologies. They argue that if Japan blocked the Makino deal on security grounds, South Korea should likewise assess the Korea Zinc case from an economic security perspective.

MBK, however, has rejected such concerns as excessive. The firm stated that the China Investment Corporation (CIC) accounts for only about 5% of the total committed capital in Fund VI, with the remaining 95% coming from global institutional investors, including pension funds. MBK also noted that CIC is a global institutional investor that has invested in major private equity firms such as Blackstone, The Carlyle Group, and KKR.

Nevertheless, critics argue that even a small stake tied to a Chinese sovereign wealth fund—China Investment Corporation—raises concerns when transactions involve companies holding nationally sensitive technologies. MBK has countered that CIC is a passive financial investor with no influence over management decisions.

The structure of the fund has also added to the debate. MBK Fund VI is reportedly domiciled in the Cayman Islands, a jurisdiction commonly used by global private equity firms for tax and structural efficiency. While not inherently problematic, the structure has drawn criticism for making it difficult for the public to clearly identify the ultimate source of capital.

The controversy highlights a broader shift, as cross-border M&A involving companies tied to critical sectors—such as key minerals, defense, and semiconductors—are increasingly being evaluated through the lens of national security. As countries tighten oversight of advanced technologies and supply chains, private equity firms’ funding sources and investment structures are also coming under greater scrutiny.

 

 

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