Kyobo Life Put Option Dispute Resolved... Affinity and GIC Sell Below Purchase Price (Comprehensive)

Affinity Consortium Activities Conclude
Only IMM PE and EQT Partners Remain

Affinity Equity Partners, a financial investor (FI) of Kyobo Life Insurance, and the Government of Singapore Investment Corporation (GIC) have ultimately decided to sell their stakes in Kyobo Life at prices lower than their purchase prices. This marks the beginning of the final phase in the 'put option dispute' with Kyobo Life Chairman Shin Chang-jae, which has lasted for six years.

According to the investment banking (IB) industry on the 7th, Chairman Shin and Affinity and GIC agreed on a put option price of 234,000 KRW per share. Accordingly, Affinity and GIC will exercise their put options on a total of 2,777,750 shares, including 9.05% (435 billion KRW) and 4.50% (215 billion KRW) stakes in Kyobo Life, respectively, and Chairman Shin will sell these shares to financial institutions such as Shinhan Investment Corp.

With this, Affinity and GIC are expected to end the activities of the Affinity Consortium, which was formed together with IMM Private Equity (5.23%) and EQT Partners (5.23%). Min Byung-chul, Head of Korea at Affinity Equity Partners, said, "We reached an agreement through continuous dialogue and consultation in a reasonable direction that allows all stakeholders to win-win," adding, "Affinity will continue to do its best to create and enhance the value of portfolio companies based on positive partnerships in Korea."

The agreed price is lower than the 410,000 KRW per share that Affinity claimed when the put option dispute began in 2018, as well as the 245,000 KRW price at the time of the initial investment in 2012. However, considering that Kyobo Life's total dividends from 2013 to 2023 amounted to 980.1 billion KRW, Affinity and GIC have collected a total of 132.8 billion KRW. Although they sold their shares at a loss of about 4.5%, they have effectively recovered their principal through dividends over the years.

There is also a high possibility that Chairman Shin will reach an agreement on the desired price with IMM PE and EQT Partners. Earlier, Chairman Shin purchased a 5.33% stake in Kyobo Life from Apalma Capital last month at 198,000 KRW per share. This time, the deal is expected to close in the 230,000 KRW range, as the market price is already formed between the high 190,000 KRW to mid-200,000 KRW range.

IMM PE argues that a price of over 310,000 KRW per share is appropriate, considering interest burdens due to delayed investment recovery and principal protection for co-investment LPs (National Pension Service). Currently, Chairman Shin has selected EY Han Young as the third-party valuation institution and is proceeding with the put option price calculation process, so they are waiting to see the results.

If the put option price set by the third-party valuation institution is not accepted, three valuation institutions will be selected again to propose put option prices respectively. Then, Chairman Shin will choose one price among the three.

Once the agreement between Kyobo and Affinity is reached, the next step will be Kyobo Life's transition to a holding company. Kyobo Life has already announced plans to convert to a holding company in 2023. The plan aims to diversify its business structure away from the shrinking life insurance-centered business due to low birth rates and aging population, and secure new growth engines. With the sale of stakes by Apalma, followed by Affinity and GIC, it has become easier to secure the 66.7% stake required for special resolutions. (Related article=[Why&Next] Kyobo Life's Crossroads of Fate... Increased Possibility of Holding Company Transition)

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