PE firms miss out on Korea’s Jinro

A host of private equity bidders were outmanoeuvred by a South Korean brewing firm in the battle for control of one of the Asian drinks industry’s most prized assets.

Jinro, the South Korean liquor manufacturer, has been acquired by Hite Brewery, the country’s largest brewer, in a $3.2 billion (€2.5 billion) transaction. The price paid represented a reported 10 to 12 times EBITDA.

A shortlist of ten bidders included a strong private equity presence, including CVC Asia Pacific, JP Morgan Partners, and a consortium comprising Newbridge Capital and Hong Kong’s Affinity Equity Partners.       

The asset was tipped to be acquired by a financial buyer. Despite being laden with debt Jinro is a strong brand, having been established in 1924 and now accounting for 50 percent of all Korean white spirits consumption.

The fact that Jinro has ended up in the hands of a strategic acquirer will be viewed as a gloomy portent by international private equity firms operating in South Korea.

Such moves are seen as indicative of a new and hostile attitude towards foreign investment firms on the part of the South Korean government.

They have been dealt several blows recently, with the authorities seeking to tax the profits emanating from Newbridge Capital’s lucrative recent sale of Korea First Bank and Warburg Pincus being investigated for possible illegal trading during its piecemeal disposal of credit card business LG Card Co from late 2003 onwards.

Such moves are seen as indicative of a new and hostile attitude towards foreign investment firms on the part of the South Korean government, which is thought to have come under pressure to curb their influence and stop large chunks of profit being taken out of the country.

The Financial Times reported that Hite Brewery’s financiers include welfare funds and a unit of the government-run Korea Development Bank.