KKR acquires Oriental Brewery for $1.8bn

The global buyout firm has agreed to the terms laid out by the brewery’s parent InBev, which include its right – but not obligation – to reacquire the brewery within five years on ‘pre-determined financial terms’.

Anheuser-Busch InBev has agreed to sell South Korea’s Oriental Brewery to Kohlberg Kravis Roberts (KKR) for $1.8 billion.

InBev will have the right, but not an obligation, to reacquire the brewery within five years after the transaction is closed on pre-determined financial terms, according to a joint statement. The deal is expected to be completed by the third quarter of 2009, subject to customary approvals under Korean law as well as other customary closing conditions.

Oriental buyout: “a beacon of hope”

In addition, InBev retains an ongoing interest in Oriental Brewery through an agreed earnout.

InBev will also continue its relationship with Oriental Brewery by granting KKR exclusive licenses to distribute certain beverage brands such as Budweiser and Hoegaarden in South Korea.

KKR obtained financing for its first investment in South Korea from JPMorgan, HSBC, Nomura Holdings and Standard Chartered, according to a source. KKR declined to comment.

The transaction gives InBev, “a non-recurring capital gain of approximately $500 million,” and is part of the company’s de-leveraging programme. InBev had taken a $7 billion bridge loan when it bought out US-based Anheuser-Busch for $52 billion in 2008.

This sale effectively ends a bidding war in which Asian buyout firms MBK Partners, Affinity Equity Partners, Korean retail conglomerate Lotte Group and global brewing major SABMiller were reportedly shortlisted.

Founded in 1952 by Korean conglomerate Doosan Group, Oriental Brewery was acquired by InBev in 1998. Belgium-based InBev is the world’s largest beer company and currently produces beverages including the OB, Cass and Cafri lager brands.

If completed, the Oriental Brewery deal will likely be one of the largest buyouts seen this year not only in Asia Pacific but perhaps in the world. In fact, one Hong Kong-based investment banker recently described it as “a beacon of hope”.

Buyout activity has declined significantly in the region with large deals being scuppered in the wake of the financial crisis. In October 2008, telecommunications provider PCCW cancelled the sale of a 45 percent stake in its IT, telecommunications and media business, citing low offers from private equity firms. The deal was expected to fetch more than $2.5 billion.  

In the same month, Shenzhen-based telecommunications company Huawei Technologies postponed the sale of a majority stake in its mobile products unit to private equity firms, in a deal expected to fetch approximately $2 billion.