KKR wins Korea’s largest ever buyout

If completed, KKR’s $1.8 billion purchase of Oriental Brewery will also be the second largest buyout globally so far this year.

The news in May that Anheuser-Busch InBev had agreed to sell South Korea’s Oriental Brewery to Kohlberg Kravis Roberts (KKR) for $1.8 billion has brought the country’s largest ever buyout one step closer to reality.

Following two rounds of bidding against private equity firms including Korea’s MBK Partners and Hong Kong-based Affinity Equity Partners, KKR was announced the winner. The firm agreed to terms laid out by InBev including the right, but not the obligation, to reacquire the brewery within five years after the transaction is closed on pre-determined financial terms, according to a joint statement.

In addition, InBev retains an ongoing interest in Oriental Brewery through an agreed earnout.
If completed, the Oriental Brewery deal will be the largest financial sponsor buyout ever seen in South Korea and the second largest globally so far in 2009, according to data from Dealogic.

It will also be the largest buyout in the Asia (ex Japan) region since the $2 billion acquisition of Beijing-based Honiton Energy Holdings by Arcapita Bank and Colossus, a holding company of the Indian conglomerate Tanti Group, in July 2008.

Buyout activity has declined significantly in the region since then, with large deals being scuppered in the wake of the financial crisis. In October 2008, telecommunications provider PCCW cancelled the sale of a 45 percent stake in its IT, telecommunications and media business, citing low offers from private equity firms. The deal was expected to fetch more than $2.5 billion.  

Coming as it has in the middle of the economic downturn, one Hong Kong-based investment banker described news of the KRR/Oreintal Brewey deal as “a beacon of hope”.