Anheuser-Busch InBev is in advanced talks to reacquire Korean beer-maker Oriental Brewery (OB) from private equity firms KKR and Affinity Equity Partners, a person familiar with the matter said on Monday.
The Belgium-headquartered firm will use its call option to regain the maker of South Korean beer brands Cass, Cafri and OB Golden Lager, people familiar with the matter said. AB InBev has the right of first refusal to reacquire the company at 11 times Ebitda, they added.
An announcement is expected soon, according to another person familiar with the matter.
Globally, executives seem to have more confidence in the outlook for the macro economy, resulting in a flurry of mergers and acquisitions since the start of 2014.
News of AB InBev’s talks in Korea follows closely behind Japanese beverage group Suntory’s acquisition of US whisky maker Beam for $16 billion.
KKR and Affinity have helped OB grow its market share from around 41% in 2007 of the Korean beer market to about 62% as of 2013, said one of the people. The funds have achieved this partly through new product launches and a greater focus on marketing using TV commercials featuring Korean celebrities, the person said.
The next step will be winning regulatory approval for the private equity firms’ exit from OB – never a given in Korea. However KKR and Affinity may have an easier ride because the regulators tend to focus more on heavily regulated sectors such as banks, both sides of the transaction are foreign and AB InBev is reacquiring an asset it owned not very long ago.
Beer buddies
In 2009, KKR agreed to pay $1.8 billion to buy OB from InBev but the owner of Budweiser and Corona beer brands made sure the sale included an option for it to regain control of OB after five years after the deal closed, that is up to mid-2014.
The call option is at a significant premium to the price that KKR paid and, if the option were to be exercised, the private equity fund would be able to consider the deal a home run, said sources at the time.
“The option mechanism was very clear,” said one person familiar with the matter.
The sale was part of InBev’s efforts to pay off debt after purchasing Anheuser-Busch the year before in an acquisition that cost $52 billion. As a result, InBev was looking for a buyer that could provide both speed and certainty.
At the time it was the largest ever financial sponsor M&A buyout in Korea, exceeding the $1.2 billion buyout of Korea Exchange Bank by Lone Star Funds in 2003, according to Dealogic.
The deal was valued at an Ebitda multiple of around eight times, said sources at the time.
