ANHEUSER-Busch InBev, the world’s largest brewer, has agreed to buy back South Korea’s Oriental Brewery Company (OB) for $5.8bn (£3.53bn) from KKR & Co and Affinity Equity Partners in what is the biggest ever exit by a private equity firm in Asia.
Yesterday’s deal more than triples the original $1.8bn investment by the firms that bought OB from InBev during its period of aggressive divestments after buying Anheuser-Busch for $52bn in 2008.
“We are excited to invest in South Korea and to be working with the OB team again. OB will strengthen our position in the fast-growing Asia Pacific region and will become a significant contributor to our Asia Pacific Zone,” said InBev chief executive Carlos Brito.
The deal already pushes the value of Asian merger and acquisition (M&A) activity in 2014 to $6.1bn after only two deals, above last year’s $3.3bn (45 deals) and on track to beat 2011’s record of $19.8bn (69 deals).
“We are proud to have partnered with OB these past five years,” said KKR Asia partner Joseph Bae.
“The success experienced since 2009 is a testament to all the employees, and we are gratified to have invested in the company and supported the company’s growth.”
The $5.8bn price tag is around 11 times InBev’s 2013 earnings of $500m. The average price paid for brewery companies so far this year has been nearly 18 times, making the purchase relatively cheap.
KKR’S RECORD-BREAKING ASIAN EXIT
More than 25 years since it launched the biggest buyout of all time, Kohlberg, Kravis & Roberts yesterday proved it still had the same old swagger to pull off record breaking deals. The $5.8bn sale of the South Korean beer maker is the biggest private equity exit in Asia on record, dwarfing the $3.3bn raised by Lone Star Funds when it sold its 51 per cent stake in Korea Exchange Bank in November 2010. On a global scale it comes in the top 30 exits of all time, in a list dominated by US sales. KKR’s engineering of the deal helped deliver a healthy return on the company’s original investment, which it made from a $4bn war chest raised in 2007 to target Asian companies. It originally stumped up $800m from the $4bn cash pile, plus about $750m of loans provided by banks and a $300m loan from AB InBev itself to take control of Oriental Brewery in 2009. In a surprise move, it then sold half of its equity stake to an Asian-focused buyout house Affinity Equity Partners for $400m, plus half of the debt obligations. Under the terms of the deal struck in 2009, AB InBev had the right to buy the company back after five years at a multiple of 11 times earnings, which gave yesterday’s sale price of $5.8bn. KKR will receive half of the proceeds along with Affinity. It will also return $320m of cash back to AB InBev as part of the transaction. The deal is another feather in the cap for KKR’s man in Asia, Joe Bae (right), tipped as a future leader of the firm. He recently helped raise a second war chest for KKR in Asia, this time collecting $6bn from investors. Attaching the accolade of Asia’s biggest ever sale to his first fund is a landmark his second fund will hope to follow – and put him in pole position at KKR.