Seoul – The resolution of Kyobo Life Insurance's long-standing put option dispute with Affirma Capital has ignited speculation about the future of a similar, ongoing disagreement with an Affinity-led consortium. Market watchers are keenly observing whether Affinity will be influenced by Affirma's recent settlement, which saw the private equity firm accept a significantly lower price for its Kyobo shares than initially demanded.

The central question revolves around whether Affinity will reduce its asking price for Kyobo shares. Affirma's acceptance of roughly half of its initial demand has placed pressure on Affinity to reconsider its position. This development is particularly significant given Kyobo Life's stalled plans to launch a financial holding company. A swift resolution with Affinity would pave the way for this initiative to move forward.

However, sources suggest that reaching an agreement with Affinity may require further intervention from the International Chamber of Commerce (ICC) Court of Arbitration. The substantial difference in valuation between Kyobo and Affinity, estimated to be at least 10 percent, likely necessitates a third-party appraisal.

Kyobo Life Chairman Shin Chang-jae recently reached a settlement with Affirma, agreeing to purchase their 5.33 percent stake for 198,000 won ($137) per share—considerably less than the 397,900 won they sought. This resolution, facilitated by funding from Shinhan Securities and Korea Investment & Securities, effectively ends the ongoing ICC arbitration case initiated by Shin.   

Affinity, along with IMM Private Equity, EQT Partners, and GIC, invested in Kyobo in 2012, acquiring a 24 percent stake. Following the insurer's failure to go public by the agreed deadline, the consortium exercised its put option, demanding 410,000 won per share. The ensuing dispute has been under arbitration.   

The Affirma settlement casts a long shadow over the Affinity negotiations. “It remains to be seen how this plays out, but the Affirma case is certain to complicate the considerations,” a financial industry insider commented.

Kyobo Life's ambition to establish a financial holding firm, encompassing Kyobo Securities and Kyobo AXA Investment Managers, has been hampered by shareholder disagreements, primarily with Affinity, the second-largest stakeholder.

While EY Han Young is currently assessing the share price, the wide gap between the two parties suggests a protracted process. Despite the uncertainties, sources remain optimistic about a positive outcome in the long run.

The legal landscape surrounding these disputes has also seen recent developments. In February 2023, the Seoul High Court upheld a lower court ruling in favor of Affinity, dismissing accounting fraud allegations related to the valuation of Kyobo's pre-IPO price. The court emphasized the importance of professional review in valuations, stating that no evidence supported the claim that the price was solely dictated by Affinity without Anjin's expert opinion. This ruling further complicates the ongoing negotiations and highlights the complexities of the put option disputes facing Kyobo Life.

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