The parties are hammering out final terms of what would be one of
Asia's biggest ever private equity transactions with the aim to
reach an agreement before the end of January, the people said.
The potential purchase by the world's biggest brewer comes amid
upbeat prospects for beer consumption in Asia, with the region's
$258 billion market growing twice as fast as the rest of the world.
Discussions on the sale are continuing but they could still fall
apart and there is no guarantee a deal will be struck, the people
cautioned, asking not to be named because the matter is not public.
If final terms are agreed, a deal could come as early as next week,
one person added.
AB InBev, KKR and Affinity declined to comment. Oriental Brewery
could not be immediately reached for comment.
AB InBev sold Oriental Brewery to KKR for $1.8 billion in 2009. That
sale was part of InBev's efforts to raise money to ease the debt
burden from its acquisition of U.S. beer maker Anheuser-Busch a year
KKR later sold half of the equity stake in Oriental Brewery to
Under the 2009 deal, AB InBev has the right, but not the obligation,
to buy back Oriental Brewery on predetermined financial terms within
five years after the closing of the transaction, a period that
expires in July this year.
The agreement allows KKR to sell Oriental Brewery back to AB InBev
for around 11 times earnings before interest, taxes, depreciation
and amortization (EBITDA), according to the people familiar with the
OB, as the brewer is known, reported EBITDA of around $400 million
in its last financial statement, posted at the end of 2012. The
brewer cut costs, increased cash flows and gained market share under
KKR's ownership to become South Korea's biggest brewer.
A successful deal would represent the biggest-ever Asian exit for
KKR and Affinity.
Rapid growth in Asia's beer market has drawn global brewers to the
region. Carlsberg, Heineken NV and SABMiller Plc have all struck
deals in Asia over the past five years to offset sluggish sales in
As a result, beer-related M&A in Asia has commanded rich premiums,
with global companies paying up to buy companies to either get a
foothold in fast growing markets or to protect their turf from home
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Heineken NV paid $6.4 billion for control of Tiger beer maker Asia
Pacific Breweries Ltd in 2012, translating into a multiple of 35
AB InBev has a relatively small presence in Asia Pacific, with the
region accounting for 14.3 percent of the 403 million hectoliters of
beer it sold and 2.5 percent of its $15.5 billion in EBITDA,
according to most recent company filings.
"The option to buy back was struck in 2009 when the world looked a
much bleaker place. And I suspect that the agreed buy-back multiple
looks very attractive in today's world," said Bernstein Research
analyst Trevor Stirling.
AB InBev has been keen on South and Central American growth and last
year it acquired its remaining shares of Mexico's Modelo Grupo for
Oriental Brewery's only domestic rival Hite Jinro, which has lost
market share to Oriental Brewery in the last few years, trades at an
EV/EBITDA multiple of 12.74 times (CHK), according to Thomson
The Oriental Brewery-Hite duopoly controls 90 percent of South
Korea's beer market.
Oriental Brewery's growth and the prospect of a bumper return has
boosted fundraising efforts of both private equity owners.
KKR last year raised a $6 billion Asia fund, the region's biggest
ever, while Affinity has just closed a $3.8 billion fourth fund,
according to a person with knowledge of the matter. Affinity's new
fund is the biggest ever raised by an Asian firm outside Australia.
(Reporting by Stephen Aldred, Denny
Thomas in Hong Kong and Soyoung Kim in New York; editing by Steve Orlofsky and Andrew Hay)
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