Kyobo, Affinity on blame game over IPO rejection

South Korea’s Kyobo Life Insurance and its second-largest shareholder -- a consortium led by Affinity Equity Partners -- are blaming each other for its recent failure to carry out an initial public offering.

The blame game follows the nation’s sole bourse operator Korea Exchange’s decision on July 8 to reject an initial public offering by Kyobo, without citing a reason. Market watchers, however, cited Kyobo’s yearslong legal dispute with the consortium led by the Hong Kong-based private equity firm behind the KRX’s latest move.

“Our IPO plan was canceled because of Affinity’s disruption,” Kyobo said in a statement released Friday.

“Affinity must cooperate as two-thirds of our shareholders have agreed with our IPO plan,” it added.

As of end-2021, Kyobo CEO Shin Chang-jae and related parties stood as the insurer’s largest shareholder with 36.91 percent, while the consortium led by Affinity held a 9.05 percent stake, making it the second-largest shareholder. Other notable shareholders include Ontario Teachers’ Pension Plan with a 7.62 percent stake, the Korea Export-Import Bank with 5.85 percent and a consortium led by local private equity firm IMM PE with 5.23 percent.

Affinity refused to back down and released a statement on the same day saying that, “All faults and responsibilities for Kyobo’s IPO failure is with its CEO Shin who has failed to uphold his side of the bargain among shareholders.”

At the core of the dispute lies Kyobo and Affinity’s failure to get on the same page about the insurer’s IPO price. Kyobo has expressed its desire to set its IPO price based on the current market conditions, while Affinity has been calling for the price to be set at 409,912 won ($311.41) per share based on the put option agreement signed with the Korean insurer in 2012.

The consortium claims that the 2012 put option contract obligates Shin to buy out its shares unless he had succeeded in floating the company by 2015. But no initial public offering has yet to take place.

In October 2018, the consortium exercised the option. But Shin refused to buy out the shares, citing the exorbitant price of 409,912 won per share.

The International Chamber of Commerce intervened at the group’s request, but the two parties have yet to settle their differences. A tribunal, which has already said the contract itself remains valid, is now asked to rule on how the two should set the price, though the decision is not expected anytime soon.

Kyobo Life had been seeking to complete an IPO within the first half of this year to diversify its funding sources to brace for the adoption of a new accounting rule for insurance products here in 2023. Its second IPO application was filed in December.

(mkjung@heraldcorp.com)