Affinity, GIC sell out of Kyobo Life; Chairman Shin seeks holding firm, M&A

Affinity Equity Partners and Singapore’s sovereign wealth fund GIC have sold their entire stake in Kyobo Life Insurance Co., exiting from their investment in South Korea’s third-largest life insurer after 13 years.

Late Friday, Affinity sold its 9.05% stake in Kyobo to SBI Group, a Japanese financial conglomerate, while GIC sold its 4.5% stake to a special purpose company set up by Shinhan Investment Corp. and Korea Investment & Securities Co.

Affinity and GIC sold their combined 13.55% stake at 234,000 won per share, sources said.

The agreed price is below the 245,000 won per share that the financial investors (FIs) paid 13 years ago to acquire their stakes.

The three buyers – SBI, Shinhan and Korea Investment – are said to be friendly to Kyobo Life Chairman Shin Chang-jae, who has been in a protracted put option dispute with Kyobo’s four FIs – Affinity, GIC, EQT Partners, previously known as Baring PE, and IMM Private Equity – for years.

The deal will partially end the protracted put option dispute and allow the Kyobo chairman to minimize the capital outlay required to consolidate his control of the company.

Investment banking industry sources said last week that Shin was in talks with some of its FIs to help them exit from their investments in Kyobo even below their initial investment costs.

Back in 2012, Affinity, GIC, EQT Partners and IMM PE invested a combined 1.2 trillion won in Kyobo Life.

In 2018, the investors wanted to exercise their put option, demanding Shin repurchase their shares at 409,912 won a share – a price the chairman called “unreasonably high.”

The disagreement led to two international arbitration proceedings, while Shin and his accounting team were reassessing “fair” put option prices.

DIFFERENT SETTLEMENT PREFERENCES

While the investor group initially maintained a unified front in their demand for higher put option prices, there have been hints of talks with individual firms since early this year.

The divergence of the FIs’ exit plans stems from their differing financial positions.

Affinity and GIC, which managed to lower their average costs with dividends they received from Kyobo, ultimately agreed to sell their shareholdings at 234,000 won a share, sources said.

Rather than extending their 13-year dispute, they opted for a “pragmatic settlement,” sources said.

EQT and IMM PE, however, are said to be holding firm that no sale should occur below 310,000 won a share.

Shin has raised his stake in Kyobo Life by recently acquiring a 5.33% stake from Affirma Capital for 216.2 billion won, bringing his total shareholding to 39.11%.

He has secured over 200 billion won in financing from Shinhan Investment and Korea Investment & Securities, using his shares as collateral.

With the latest stake sales by Affinity and GIC, Shin’s stake in Kyobo, including those held by his friendly shareholders, will reach 52.66%, giving him outright control of the insurer.

SHIFT TO A HOLDING FIRM STRUCTURE, M&A, IPO

With the latest deal, analysts said Shin has taken a significant step in consolidating his position, resolving investor disputes and paving the way for strategic expansion.

Affinity and GIC’s stake sale has effectively removed Shin’s management risk, clears a key hurdle for Kyobo Life’s transformation into a financial holding company, aggressively pursued by the chairman.

Shin is also expected to resume his push for the initial public offering (IPO) of Kyobo Life.

The chairman has made efforts to list Kyobo shares on Korea’s main bourse to allow its major financial investors to exit their investments and enhance the insurer’s enterprise value.

Industry officials are also watching for potential merger and acquisition moves by Shin.

In 2023, he publicly revealed his intention to acquire a non-insurance company to strengthen his envisioned holding company’s portfolio, which includes life insurance, brokerages and asset management.

Meanwhile, sources said Shin plans to leverage the stake sales by Affinity and GIC to continue negotiations with EQT Partners and IMM PE over their exit plans.

Write to Hyung-gyo Seo and Hyun-Woo Kang at seogyo@hankyung.com

In-Soo Nam edited this article.