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Private equity

GIC, PEFs face further delays to Kyobo exit after ruling

Int'l Chamber of Commerce bars investors from selling Kyobo shares near double purchase price back to its chair

By Sep 07, 2021 (Gmt+09:00)

GIC, PEFs face further delays to Kyobo exit after ruling
Singapore’s GIC, Canada's Ontario Teacher's Pension Plan (OTPP) and private equity firms, including Affinity Equity Partners, may need to endure a protracted process again to exit their decade-long investment of over 1.2 trillion won ($1 billion) in South Korea's Kyobo Life Insurance Co.

The International Chamber of Commerce (ICC), the world's leading arbitral institution, on Monday rejected a claim filed by Affinity Equity and other financial investors to sell their shares in Kyobo Life back to the insurance company's Chairman and top shareholder Shin Chang-jae for 409,000 won ($353.3) apiece, or about double their purchase price of 245,000 won.

According to the financial industry sources, the Paris-based institution dismissed their proposed exercise price, set by accountants hired by the investment companies, as invalid. But it upheld the financial investors' (FIs) right to exercise their put options on Kyobo shares granted in September 2012.

The ruling was made in response to the Affinity-led group's request in March 2019 to resolve their dispute with Kyobo Life over the divestment. The ICC's decision has the same effect as a verdict from South Korea's highest court.

Back in 2012, Affinity, GIC, Baring Private Equity and IMM Private Equity acquired a combined 24% stake in the country's No. 3 life insurer for 1.2 trillion won from Daewoo International Corp., currently POSCO International.

Their investment was arranged by Kyobo Chairman Shin, who the FIs argued had lured them with a pledge either to take the company public by September 2015, or to allow them to sell their shares back to him if the IPO does not take place as scheduled.

With no progress in Kyobo's IPO efforts, Affinity Equity and the three other FIs in late 2018 called on Shin to buy back their shares each at 409,000 won and then took the issue to the ICC in March 2019.

Affirma Capital with a 5.33% stake in Kyobo followed suit. It brought forward a similar request to ICC in the same year.

But Shin argued that he had never made a pledge to list Kyobo by 2015, and thus the FIs are not entitled to exercising put options on the insurance firm. Accordingly, he turned down the ICC's request of coming up with his own assessment at which the financial investors can exercise their put options.

Kyobo had postponed an IPO several times, citing poor stock market conditions and uncertainties related to new financial reporting standards for insurance companies.
Kyobo Life Chairman Shin Chang-jae
Kyobo Life Chairman Shin Chang-jae

Both the Affinity-led FIs and Shin said the ICC's decision was made in their favor.

ICC removed the obligation for Shin to make interest payments to the FIs in relation to the delayed IPO plans and put options. At the same time, it ordered Kyobo to cover the cost for Affinity bringing the case to the ICC.

But the ICC's ruling does not resolve their dispute. It added that Affinity needs to take separate legal action for damages against Shin with a South Korean court in relation to the put option, meaning the ICC ruling might be just the start of their lengthy legal battles.

Last year, Shin sued PEF employees and accountants involved in assessing its share price at which they tried to exercise put options. He accused them of making a fabricated report on Kyobo Life’s valuation.

In February of this year, the Affinity and three other FIs were allowed with a warrant by a Seoul district court to seize Shin’s physical stock certificates in relation to the delayed exercise of the put options. Their legal representatives scuffled with Shin’s security guards to break into his home, but failed to exercise the warrant because all of Shin’s stocks were in an electronic form.

Shin, with a 33.78% stake, has been leading Kyobo Life as chairman since May 2000. The former obstetrician and his family members control 36.91% of Kyobo Life.

Kyobo Life's Major Shareholders as of June 30, 2021

Investor Ownership Investment Year
Corsair Korea Investors LLC 9.79% 2007
Affinity Equity 9.05% 2012
Ontario Teachers’ Pension Plan (OTPP)* 7.62% 2012
Export-Import Bank of Korea 5.85% N/A
Affirma Capital 5.33% 2007
IMM Private Equity 5.23% 2012
Baring Private Equity 5.23% 2012
GIC 4.50% 2012
Note: *In 2017, OTPP sold a 2.3% stake in Kyobo to Pantheon Ventures and other unidentified investors, cutting its stake from 9.9%.

Write to Ho-gi Lee, Chae-yeon Kim and Jun-suk Choi at

Yeonhee Kim edited this article.

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