FI '6 Misunderstandings and Truths About Kyobo Life Insurance Put Option' Statement
Kyobo Life Insurance's Rebuttal on 'The Essence of the Prosecutor's Indictment Against Affinity and Anjin Accounting Corporation'
[Asia Economy Reporter Oh Hyung-gil] The stage for the put option (stock purchase claim right) dispute between Shin Chang-jae, chairman of Kyobo Life Insurance, and the financial investors (FI) has moved to the courtroom.
Following Kyobo Life Insurance's complaint, the prosecution indicted accountants from Deloitte Anjin Accounting Corporation and FI-related personnel on charges of violating the Certified Public Accountant Act. In response, the FI side filed a complaint and accusation against Chairman Shin's side for fraud with the prosecution. As both sides accuse each other, the battle for public opinion to form a favorable atmosphere is intensifying.
According to the insurance industry on the 23rd, the prosecution has indicted accountants from Deloitte Anjin Accounting Corporation who inflated the value of Kyobo Life Insurance's shares and FI executives without detention on charges of violating the Certified Public Accountant Act.
They are suspected of receiving improper requests from FI and performing services that may have inflated the put option exercise price.
Chairman Shin (holding 33.78% stake) signed a shareholders' agreement with the Affinity Consortium, which purchased Kyobo Life Insurance shares held by Daewoo International in 2012, including a put option right that allows each shareholder in the consortium to demand the purchase of their shares if Kyobo Life Insurance's initial public offering (IPO) was not completed by the end of September 2015.
The Affinity Consortium (holding a total stake of 24%) consists of private equity funds such as Affinity Equity Partners, Baring PE, IMM PE, and the Singapore Investment Corporation.
FI: "No Reason to Provide Unfair Benefits in Calculating a Fair Price"
When Kyobo Life Insurance failed to conduct an IPO by the end of September 2015 due to low interest rates and strengthened regulations, the Affinity Consortium exercised the put option in October 2018. At this time, accountants from Deloitte Anjin Accounting Corporation participated as the evaluation agency for the put option price on behalf of the Affinity Consortium, and they valued Kyobo Life Insurance shares at 409,000 KRW per share.
On the other hand, Chairman Shin's side claimed a price in the 200,000 KRW range.
Kyobo Life Insurance argued that the main cause of the company's damage from the put option dispute with FI was the deliberately inflated stock value evaluation by Deloitte Anjin Accounting Corporation and filed a complaint against the certified public accountants of Deloitte Anjin Accounting Corporation in April last year for violating the Certified Public Accountant Act.
Industry insiders expect that the indictment of the certified public accountants from Deloitte Anjin Accounting Corporation will also act as a variable in the arbitration ruling.
In March 2019, the Affinity Consortium filed an international arbitration with the International Chamber of Commerce (ICC) Arbitration Court based on Deloitte Anjin Accounting Corporation's evaluation report. Both sides are sharply divided over the appropriateness of the put option amount calculation.
In response, Affinity issued a statement on the 21st titled "Six Misunderstandings and Truths about Kyobo Life Insurance's Put Option," pointing out that "Chairman Shin Chang-jae, who has the obligation to repurchase FI's shares, did not even propose a price nor designate an evaluation agency," and criticized, "It is outrageous to blame FI, which has now fulfilled all contractual procedures."
They also claimed, "The company's intrinsic value, which Kyobo Life Insurance evaluates annually on its own, is known to exceed the FI's appraisal price of 409,000 KRW per share," and argued, "It is absurd that the CEO of Kyobo Life Insurance, who should develop the company and increase its value, tries to undervalue the company's worth as much as possible."
Kyobo Life Insurance: "FI Ignores Judicial Judgment and Procedures... Regrettable"
In response, Kyobo Life Insurance reiterated its official position, stating, "The essence and core is that the prosecution judged the collusion in the put option price calculation process as guilty."
Kyobo Life Insurance rebutted, "According to the company's findings, Chairman Shin conveyed his intention to negotiate at a price somewhat higher than the fair market price to Affinity, but Affinity did not respond to the negotiation based on Deloitte Anjin Accounting Corporation's evaluation amount of 409,000 KRW."
Regarding the IPO delay, Kyobo Life Insurance explained, "Chairman Shin did his best," and added, "He could not carry out the IPO due to the disastrous situation facing the insurance industry, such as low interest rates and strengthened capital regulations." They emphasized, "Affinity, which participates as a board member, was well aware of this fact, and separately, Chairman Shin had several discussions with Affinity's representatives."
Previously, when the Affinity Consortium purchased a 24% stake in Kyobo Life Insurance held by Daewoo International in 2012, they received a put option allowing them to resell the shares to the largest shareholder, Chairman Shin Chang-jae, if the IPO was not completed by the end of September 2015.
On the 6th, a support message related to the novel coronavirus infection (COVID-19), '#Thanks to the People,' was posted on the outer wall of the Kyobo Life Building in Gwanghwamun, Jongno-gu, Seoul. Photo by Mun Ho-nam munonam@
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