By Yi Whan-woo | The Korea Times | February 14, 2022
Kyobo Life Insurance faces a bumpy road on its plan to go public during the first half of 2022, due to a protracted litigation between its chairman and the firm’s second-largest shareholder Affinity Equity Partners over a dispute concerning the private equity fund exercising a put option.
Chairman Shin Chang-jae is also the insurer’s largest shareholder and according to the Korea Exchange (KRX), the country’s sole bourse operator, there should be no legal battle or other conflicts that can “seriously affect” the management of a company for it to make a debut on the stock market.
The KRX cited the unsettled row between Shin and Affinity Equity Partners and delayed its decision scheduled in January on whether to approve Kyobo Life Insurance’s planned initial public offering (IPO) on the benchmark KOSPI.
Under the circumstance, the Seoul Central District Court on Feb. 10 acquitted two executives of Affinity Equity Partners and three accountants of Deloitte Anjin on the charge of colluding to inflate the strike price of the private equity fund’s put option.
The charge was brought after Kyobo Life Insurance filed a complaint in April 2021 to the prosecution, arguing that Affinity Equity Partners and Deloitte Anjin deliberately set the strike price too high. The accounting company was hired by the private equity fund to determine the fair market value of the put option.
Affinity Equity Partners had rights to exercise a put option under an agreement reached in September 2012 when it helped Shin by acquiring a 24 percent stake in the insurer owned by Daewoo International, a trading company now owned by POSCO and renamed to POSCO International.
Under the agreement, Kyobo Life Insurance was obliged to keep its promise to conduct an IPO by September 2015 or otherwise have the private equity fund exercise the put option right to cash in its investment.
The 24 percent stake was purchased for 245,000 won ($204) per share in 2012. And in 2018, Affinity Equity Partners, in consultation with Deloitte Anjin, set the strike price at 410,000 won per share, after the insurer failed to deliver the promise.
Chairman Shin found the set strike price unacceptable and refused to buy the shares, claiming the appropriate price range should be around the initial buying price in 2012.
The Seoul Central District Court found the five indicted executives and accountants not guilty, ruling the strike price was calculated in a fair and objective manner.
The ruling, however, complicates the case, because it contradicts a previous ruling made by the International Chamber of Commerce (ICC) in September 2021.
The ICC arbitrated the case, following a request from Kyobo Life Insurance and Affinity Equity Partners in March 2019, and concluded that the former is not obligated to buy the shares from the latter.
Concerning Friday’s ruling, Kyobo Life Insurance said it will still go ahead with the IPO, which is part of a strategy for the country’s third-largest life insurer to transform itself into a financial company with a holding company structure, allowing it to expand to a wider range of services other than insurance.