Do not go gentle into that good night, old age should burn and rave at close of day; Rage, rage against the dying of the light, though wise men at their end know dark is right, because their words had forked no lightning they, do not go gentle into that good night.
Kyobo Life chief pressed by financial investors over put option
Kyobo Life Insurance Chairman and CEO Shin Chang-jae
By Jhoo Dong-chan
By Jhoo Dong-chan
Kyobo Life Insurance Chairman and CEO Shin Chang-jae is facing mounting pressures from investors seeking to exercise a put option to withdraw their investments from the life insurer.
A put option is a stock market device that gives the owner the right to sell an asset at a specified price by a predetermined date to a given party.
Of the insurer's investors, a consortium led by Hong Kong-based Affinity Equity Partners (AEP) submitted an application for arbitration against Shin with the International Chamber of Commerce (ICC) last year to exercise the put option, since the insurer has yet to go public after years of delay.
Following AEP's lead, another investor Standard Chartered Private Equity (SC PE) has also requested ICC arbitration recently to recover damages from the delay in the insurer going public.
Tension between Shin and Kyobo's investors intensified since the insurer decided not to submit its application for an initial public offering (IPO) last year because of the nation's sluggish stock market.
In 2012, the AEP consortium acquired a 24 percent stake in the insurer from the company then called Daewoo International for 1.2 trillion won ($1.01 billion). They included a put option to resell the 24 percent stake to Shin if Kyobo Life did not go public before 2015.
Before the AEP consortium's acquisition, another consortium led by SC PE acquired a 15.12 percent stake in Kyobo Life in 2007. They also included the put option to sell their 15.12 percent stake to Shin if it were to not go public by 2015.
Since the insurer had not submitted an IPO application by 2015, AEP announced its intention to exercise the put option and sell its stake to Shin in November.
AEP assigned Deloitte Korea to calculate the total value of AEP's 4.92 million shares. The accounting firm set 409,000 won per share upon their request, meaning Shin would need to pay 2.12 trillion won if the consortium exercises the put option.
Shin immediately protested Deloitte Korea's calculation, claiming Kyobo Life's real value stands at around 250,000 won per share. By Shin's calculation, he will have to pay about 1.3 trillion won if the AEP consortium excises the put option.
If adding SC PE's put option value, the total amount Shin needs to pay could stretch to nearly 2 trillion won even based on Shin's calculation.
“Shin still seeks a breakthrough with the investors. The door is open,” said a close aide to Shin who asked not to be named. “It will take up to two years for the arbitration to be concluded. They will reach an agreement in the meantime.”
Of the SC PE consortium's 15.12 percent stake, SC PE owns 5.33 percent while U.S.-based private equity fund Corsair has a 9.79 percent stake.