KKR, Affinity agree $5.8bn Oriental Brewery exit

The private equity firms will sell the South Korean beer maker back to its original owner.

Kohlberg Kravis Roberts and Affinity Equity Partners have entered an agreement to sell South Korea’s Oriental Brewery to Anheuser-Busch InBev (AB InBev) in a $5.8 billion deal, according to a joint statement.

The firms are not disclosing the return information on the transaction, but the pair acquired the brewer, which makes the popular Cass brand beer, in 2009 in a $1.8 billion deal, Private Equity International reported earlier.

AB InBev, the buyer, was also the original owner of Oriental Brewery in 2009. Oriental Brewery and AB InBev have also remained long-term partners through Oriental’s exclusive license to distribute select AB InBev brands in South Korea including Budweiser, Corona and Hoegaarden.

The enterprise value for the transaction is $5.8 billion, and as a result of an agreement entered into with KKR and Affinity in 2009, AB InBev will receive approximately $320 million in cash at closing from this transaction, subject to closing conditions. Oriental estimated its 2013 EBITDA at approximately KRW 529 billion (€367 million; $497 million).

AB InBev will use existing liquidity to fund the transaction. Oriental Brewery currently has a net debt-to-EBITDA ratio of about 2x, the goal being to decrease the amount of debt on its balance sheet to below this ratio before the end of 2014, according to the statement.

Since their investment in 2009, KKR and Affinity have grown Oriental Brewery’s Cass beer into the number one beer brand in South Korea, according to the firms.

Between 2009 and 2012, South Korea’s beer market grew at an average annual rate of about 2 percent, with premium brands growing at 10 percent per year.

“We are proud to have partnered with Oriental Brewery these past five years,” Joseph Bae, managing partner of KKR Asia and Kok Yew Tang, chairman and managing partner of Affinity, said in the statement. 

“The success experienced since 2009 is a testament to all the employees of OB, and we are gratified to have invested in the company and supported the company’s growth as well as their environmental and citizenship initiatives.”

The exit follows Affinity's recent fundraising success. Last week, PEI revealed that Affinity had closed its fourth private equity vehicle on $3.8 billion, exceeding its hard-cap after 16 months in the market.