Kyobo Life Insurance Settles Put Option Dispute, Chairman Secures Stake
Kyobo Life Insurance Chairman Shin Chang-jae has successfully navigated a complex put option dispute with the Affinity Consortium, the insurance company’s financial investor. According to a recent announcement, Chairman Shin and the Affinity Consortium, consisting of Affinity Equity Partners and the Singapore Investment Authority (GIC), have agreed to settle the put option at a price of 234,000 won per share.
The Affinity Consortium, holding a 24% stake in Kyobo Life Insurance, comprises Affinity (9.05% stake), GIC (4.50%), and IMM PE along with EQT (5.23% each). As part of the settlement, Affinity and GIC have withdrawn their complaints to the International Chamber of Commerce (ICC). They have also made arrangements to sell their shares in Kyobo Life Insurance to a group of financial firms, including Shinhan Investment & Securities and Japan’s SBI Group, receiving 435 billion won and 215 billion won respectively, for the sale.
This sale price for Affinity and GIC is notably less than the initial investment principal of 245,000 won per share, which totaled 680 billion won from both sides back in 2012. The initial shareholder agreement anticipated a return surpassing the investment, but due to a decline in Kyobo Life Insurance’s corporate value and substantial dividends received by Affinity and GIC over 13 years, the final arrangements were adjusted.
Kyobo Life Insurance CEO, Cho Dae-kyu, expressed optimism, stating, “Kyobo Life Insurance will be able to focus more on the work of converting to a holding company and future-oriented challenges.” However, a dispute with other financial investors, specifically IMM PE and EQT, remains unresolved. IMM PE has put forth a claim that over 310,000 won per share would be a reasonable price considering the interest burden due to the delay in recovering investments.
IMM PE and EQT intend to continue the put option dispute procedure. Chairman Shin has appointed EY Hanyoung as the third evaluation agency to assess the put option prices. The put option dispute goes back to 2012, when the Affinity Consortium acquired a 24% stake in Kyobo Life Insurance for 1.2 trillion won (245,000 won per share) in September 2012. They then established an agreement with Chairman Shin to trigger a put option if Kyobo Life Insurance failed to launch an IPO within three years.
When the IPO bid failed, the Affinity Consortium attempted to execute the put option in October 2018 at 410,000 won per share. Chairman Shin contested what he deemed an excessive exercise price, leading to protracted legal battles. Following two arbitration awards, the ICC mandated that Chairman Shin satisfy the put option obligations in December last year. With the recent agreement between Affinity, GIC, and Chairman Shin, the put option dispute has turned a new chapter.
With the resolution of the put option dispute, Chairman Shin has effectively gained up to 55.24% of Kyobo Life Insurance’s shares, inclusive of friendly shares. This figure includes Chairman Shin’s personal ownership of 33.78% and his family’s stake of 2.58%, combined with shares secured from Affinity, GIC, and Apulma Capital as a result of the dispute resolution.
