Supreme Court affirms Affinity, GIC's exit value on Kyobo Life

South Korea’s Supreme Court on Wednesday upheld the ruling that would allow the Affinity Equity Partners-led consortium, including Singapore’s GIC, to make a long-delayed exit from Kyobo Life Insurance Co. at more than 1.5 times their investment of 1.2 trillion won ($930 million).

Ending a five-year legal dispute between Kyobo and the investors, the highest court in South Korea cleared three accountants at Deloitte Anjin and two employees of Affinity Equity Partners of charges that they had unfairly inflated the value of unlisted Kyobo to help the group's divestment for hefty gains.

The Supreme Court’s decision affirmed the verdicts made by both district and appellate courts in Seoul, which rejected Kyobo’s complaint about the valuation.

The verdict will likely pave the way for the Affinity-led investors, which includes Baring Private Equity and IMM Private Equity, to finally exit from Kyobo after more than a decade.

PUT OPTION

Back in 2012, the Affinity-led consortium acquired a combined 24% stake in Kyobo for 1.2 trillion won from then Daewoo International Co., currently POSCO International Corp.

The stock purchase came with a put option, which allowed them to sell Kyobo shares back to Kyobo, including its Chairman Shin Chang-jae, if the insurer failed to go public by September 2015.

As its IPO has dragged on, the Affinity-led group in late 2018 decided to exercise the option, calling on Kyobo Life's top shareholder and Chairman Shin to buy back their shares at 410,000 won apiece. That is 1.65 times higher than their purchase price of 245,000 won.

LEGAL DISPUTE

The Kyobo chairman rejected the put option request and argued that the valuation was based on a falsified financial report in return for alleged bribes paid by the investor consortium.

The two sides have been in a legal dispute since 2018, while resorting to arbitration, which failed to settle the issue.

In the meantime, the Korea Exchange has held off its review of Kyobo’s IPO application pending a court decision.

Kybo’s family members control 36.37% of the insurer, including a 33.78% stake held by Chairman Shin, as of end-September.

Affinity Equity owns 9.05% of Kyobo Life, with Baring PE and IMM PE holding a 5.23% stake, respectively. GIC has a 4.5% stake in the Korean insurer.

Write to Si-On Park at Ushire908@hankyung.com
 

Yeonhee Kim edited this article