Anheuser-Busch InBev SA, the largest brewer in the world, has agreed in principle to purchase Oriental Brewery Co. Ltd. based in South Korea, from Affinity Equity Partners and KKR & Co.
The purchase price is $5.8 billion, which includes debt. The purchase regains the ownership of a key asset in Asia during a time of solid growth in the beer industry across the entire region.
The deal, which is the biggest ever for private equity in Asia through an acquisition, comes only a week after Beam Inc was acquired by Suntory Holdings of Japan for $13.6 billion. These transactions underscore the rapid consolidation taking hold in the global liquor industry.
SABMiller, Heineken NV and Carlsberg have all struck Asian deals over the past five years thanks to being lured by the $258 billion market in the region that is growing two times as fast as everywhere else is across the globe.
AB InBev, based in Leaven, Belgium, sold the South Korea based brewery in 2009 to KKR for $1.8 billion in an effort to ease its debt burden incurred when it purchased Anheuser-Busch, the beer maker from the U.S. for $52 billion in 2008.
KKR paid $800 million in cash with the rest in debt and later split the cash part with Affinity.
AB InBev’s presence in Asia is relatively small, with the area only accounting for about 14.3% of the 403 million hectoliters of its beer sold and 2.5% of its earnings of $15.5 billion.
Affinity and KKR’s sale of the Oriental Brewery was over five times the amount of cash they paid in 2009. This is a huge return for the size of the deal, rewarding the firms with a net profit of hundreds of millions.
AB InBev sells brands that include Bud Light and Stella Artois. It kept an option to repurchase OB, as the biggest brewer in South Korea is known, within 60 months of 2009 sales date.
For the firms that purchased OB, it was high risk only a year following the Lehman Brothers collapse, when no clarity existed on the length the global recession would run.