Shin Chang-jae - Affinity International Arbitration Hearing... "Is the Put Option Price Appropriate?"

From the 15th to the 19th
24% Stake Put Option Price
Per Share '409,000 KRW vs Around 200,000 KRW'

[Asia Economy Reporter Oh Hyung-gil] The second hearing of the International Chamber of Commerce (ICC) arbitration lawsuit concerning the put option (stock purchase claim) between Shin Chang-jae, chairman of Kyobo Life Insurance, and the financial investor (FI) Affinity Consortium will be held. Attention is focused on the direction of the arbitration lawsuit as the prosecution recently decided to indict the FI side.

According to the insurance industry on the 15th, the second hearing of the ICC arbitration lawsuit between Chairman Shin and Affinity will be held online from today until the 19th. This hearing was originally scheduled for September last year but was postponed due to COVID-19.

The ICC arbitration trial began in March 2019 at the request of the Affinity Consortium.

The Affinity Consortium, consisting of Affinity, IMM PE, Baring PE, and the Singapore Investment Corporation, purchased 24% (4.92 million shares) of Kyobo Life Insurance shares held by Daewoo International in 2012 for 1.2054 trillion won. The price was about 245,000 won per share.

At that time, Affinity signed a shareholders' agreement (SHA) stating that if an IPO (initial public offering) was not conducted by September 2015, they could exercise a put option against Chairman Shin personally.

However, conflicts arose as Kyobo Life Insurance's IPO was delayed. Affinity exercised the put option in October 2018 at 409,000 won per share (totaling 2.0122 trillion won).

Chairman Shin opposed Affinity's price calculation as absurd, responding that the company's stock price was only in the mid-200,000 won range per share, reflecting the decline in the market value of life insurance companies.

In particular, Kyobo Life Insurance accused Deloitte Anjin Accounting Firm of deliberately applying the valuation date favorably to the FI when calculating the fair market value (FMV) of the put option and reported them to the prosecution in April last year.

Earlier this year, the prosecution indicted three accountants from Deloitte Anjin Accounting Firm and corporate officials from Affinity without detention on charges of violating the Certified Public Accountant Act. Kyobo Life Insurance also submitted several petitions to financial authorities requesting a thorough investigation of Anjin Accounting Firm.

In response, Affinity has carried out provisional seizures twice since March 2019 on about 85 billion won in dividends of Chairman Shin. In April last year, provisional seizure measures were also taken on Chairman Shin's residence and salary.

The key issue in this arbitration hearing is how the prosecution's indictment of Affinity and the accounting firm will affect the case. Kyobo Life Insurance believes that since the prosecution judged and indicted them as guilty, the valuation of Kyobo Life Insurance's shares has lost credibility.

Affinity, however, argues, "All evidence submitted to the prosecution was provided by the investor to the international arbitration," and "Since the ICC does not review new evidence, it cannot affect the arbitration."

This content was produced with the assistance of AI translation services.