Shin Chang-jae, Chairman of Kyobo Life Insurance, Wins Initial Victory in Put Option Dispute... Conflict Continues

ICC "You Don't Have to Buy for 400,000 Won"
Put Option Validity Recognized... Additional Litigation is Key

[Asia Economy Reporter Oh Hyung-gil] Shin Chang-jae, chairman of Kyobo Life Insurance, won a case against the financial investor (FI) Affinity Consortium (Affinity) in an international arbitration tribunal. However, since the put option itself was ruled to remain valid, the conflict between the two parties is expected to continue for the time being.

According to the insurance industry on the 7th, the ICC arbitration panel ruled in favor of Chairman Shin in the shareholder dispute between him and the Affinity Consortium, which consists of Affinity Equity Partners, IMM PE, Baring PE, and the Singapore Investment Corporation.

The arbitration panel judged that Chairman Shin does not have to purchase the put option at the price of 409,000 KRW submitted by the Affinity Consortium or pay interest on it. The ICC arbitration ruling is final and has the same effect as a court's confirmed judgment.

Affinity claimed that the put exercise price included a management premium on Shin’s shares, but the arbitration panel did not accept this.

Regarding Affinity’s claim that Chairman Shin violated the clause in the shareholders’ agreement to "fulfill the best duty for an initial public offering (IPO)," the panel ruled that "since all directors except Lee Sang-hoon opposed the IPO promotion at the board meeting in September 2018, the breach of the shareholders’ agreement is minimal, and Chairman Shin does not need to compensate Affinity."

The panel also ruled that Shin did not violate any confidentiality obligations as claimed by Affinity.

Meanwhile, the conflict originated when the Affinity Consortium purchased a 24% stake in Kyobo Life Insurance from Daewoo International in 2012 (at 245,000 KRW per share, totaling about 1.2 trillion KRW) and entered into a put option contract as a condition for an IPO by September 2015.

If the IPO promise was not fulfilled, Chairman Shin promised to buy the shares at fair market value (FMV). Shin later attempted to promote the IPO but missed the promised deadline. Affinity offered an additional three years, but the IPO still failed.

When Kyobo Life’s IPO fell through, Affinity exercised the put option in 2018 for about 2.0122 trillion KRW (409,000 KRW per share), which was 66.9% higher than the price when the consortium purchased the shares in 2012. Ultimately, Chairman Shin’s side opposed the option exercise price proposed by Affinity, leading the case to ICC arbitration.

Criminal trials are ongoing against key executives of Affinity and the Deloitte Anjin Accounting Corporation accountants who were commissioned to evaluate the value of the put option.

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