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Private equity

Affinity, GIC speed up exit efforts on Kyobo Life

GIC, three PEFs give short notice to Kyobo Life chair to value the unlisted company' shares for their exit

By Sep 10, 2021 (Gmt+09:00)

Kyobo Life Insurance headquarters in Seoul
Kyobo Life Insurance headquarters in Seoul


Singapore's GIC, Affinity Equity Partners, Baring Private Equity and IMM Private Equity have taken the next step toward their long-delayed exit from South Korea's unlisted Kyobo Life Insurance Co., after an international arbitration body's ruling failed to resolve their dispute with the insurance's chairman. 

Shortly after the International Chamber of Commerce (ICC) invalidated their attempt to sell a combined 24% stake in Kyobo back to the insurer's chairman Shin Chang-jae earlier this week, the four financial investors (FIs) sent a letter of request to Shin to hire a third-party institution to assess his company's share price at which they can exercise the put options granted in 2012.

To speed up their exit efforts, they set a short deadline of Sept. 13 for his response.

The ICC, the world's leading arbitral institution, prohibited the FIs from selling their shares back to Shin at 409,000 won ($353) apiece as they demanded, compared with their purchase price of 245,000 won.

But it upheld the FIs' right to exercise the put options.

In accordance with the arbitrator's decision, the four FIs led by Affinity Equity are now demanding the Kyobo chairman and top shareholder Shin assess his company's value with a third-party institution to clear the way for their stalled exit.     

They also required Shin to pay all the costs for them bringing the case to the ICC and half of the relevant legal fees they paid, estimated at $16 million in aggregate, as ruled by the ICC. If Shin failed to foot the bill within the designated period, he will be required to make interest payments on the principal on a daily basis. 

The ICC's ruling cannot be reversed because it has the same effect as a verdict from South Korea's highest court.

Back in September 2012, the four FIs bought shares in Kyobo Life for 245,000 won apiece for a total of 1.2 trillion won on conditions that the country's third-largest life insurer goes public by September 2015, according to Affinity and the three other FIs. If the initial public offering failed to take place by then, they were allowed to sell the shares back to the chairman.

But Shin argued that he had never made such a pledge, but had said he would do his best to take his company public. Accordingly, he rejected the ICC's request of coming up with his own assessment at which the FIs can exercise their put options.
Kyobo Life Chairman Shin Chang-jae
Kyobo Life Chairman Shin Chang-jae

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 at 409,000 won per share and then took the issue to the ICC in March 2019.

If Shin makes no response to the FI's new request, the Affinity-led group may bring the case to a Korean court and force him to appoint a third-party institution to estimate the company's value for their divestment.  

"To retrieve their investment, the FIs may have no choice but to undergo new legal proceedings," said an investment banking source. "However long it takes, they will follow the procedures to return money to their limited partners."

In January of this year, the Affinity-led FIs accused Kyobo's Shin of fraud and tried in vain to seize his physical stock certificates. In the same month, prosecutors indicted two Affinity executives and three accountants of Deloitte Anjin, hired by the Affinity-led group, on charges of unfairly inflating the price at which the FIs sought to exercise the put options on Kyobo, accepting Shin's argument.

Other investors in Kyobo include Canada's Ontario Teacher's Pension Plan (OTPP) with a 7.62% stake and Affirma Capital with a 5.33% stake. Affirma brought forward a similar request for arbitration to the ICC in 2019, while OTPP has not taken specific action for its exit.

Shin is the top shareholder in Kyobo with a 33.78% stake and controls 36.91% of the insurer with his family members.

Write to Chae-yeon Kim and Jun-ho Cha at why29@hankyung.com

Yeonhee Kim edited this article.

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