False Evaluation of Anjin Acquitted... Kyobo Put Option Dispute Returns to Uncertainty

Second Trial Also Acquits in Put Option Dispute
Court: "Kyobo Life's Put Option Valued at 410,000 Won per Share Is Not False"
IPO Further Delayed... Additional Legal Battles Expected

[Asia Economy Reporter Minwoo Lee] The Affinity Consortium (Affinity) executives and accountants from Anjin Accounting Corporation were acquitted again in the second trial on charges of setting the Kyobo Life Insurance put option exercise price favorably for financial investors (FI). As further legal disputes are expected, Kyobo Life Insurance's listing process is anticipated to be delayed even more.

Court: "Kyobo Life Insurance put option price of 410,000 KRW per share is not a false evaluation"

On the 3rd, the Seoul High Court Criminal Division 1-1 sentenced "not guilty" in the appeal trial of key Affinity executives and accountants from Anjin Accounting Corporation, who were indicted for violating the Certified Public Accountant Act. The court ruled, as in the first trial, that Affinity and Anjin were not conspiring to inflate the fair market value (FMV) during the valuation process of Kyobo Life Insurance's put option.

The prosecution claimed that Affinity and Anjin exchanged 244 emails conspiring from the time of the valuation request regarding the valuation method, valuation factors, the final unit price per share, and the results of periodic calculations, but the court did not accept this. The court explained, "It is difficult to accept the prosecution's claim that the exchanges between the client and the valuator were limited solely to basic matters before or at the beginning of the engagement," and added, "What matters is not who proposed first between the valuator and the client, but whether the certified public accountant exercised professional judgment. Based on the current evidence, it is difficult to conclude that Anjin's accountants blindly followed Affinity's instructions without professional judgment."

Back into the fog... Kyobo Life Insurance listing becomes more distant

The dispute began at the end of 2018 when Affinity proposed a put option exercise price of 410,000 KRW per share for its 24% stake in Kyobo Life Insurance. This was far above the original purchase price of 245,000 KRW per share. At that time, the market's expected initial public offering (IPO) price for Kyobo Life Insurance ranged from 180,000 to 210,000 KRW per share (Credit Suisse) to 240,000 to 280,000 KRW (NH Investment & Securities).

The first trial court ruled that if other market value valuation methods not used by Anjin Accounting Corporation were applied, the price could reach 429,000 KRW, and thus did not consider Anjin and Affinity to have intentionally overvalued the price. However, the International Chamber of Commerce (ICC) arbitration panel ruled that Shin Chang-jae, chairman of Kyobo Life Insurance, was not obligated to accept the put option price of 410,000 KRW proposed by Affinity.

Subsequently, Samduck Accounting Corporation, indicted for the same issue, was found to have copied and submitted Anjin's report received from the client (private equity fund Apalma Capital) with only the cover changed, and was sentenced to imprisonment in the first trial. The Samduck case court pointed out, "The provided result value significantly deviated from the stock price trends of life insurance companies over the past 10 years and showed a remarkable difference from the valuation results of other accounting firms."

With another acquittal in the second trial, the legal battle is expected to continue longer. Kyobo Life Insurance's listing is again shrouded in uncertainty. Previously, Kyobo Life Insurance attempted IPOs three times since 2015, all of which failed.

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