AB-InBev to Reacquire Oriental Brewery for US$5.8 Billion
20 Jan 2014 --- Anheuser-Busch InBev, KKR and Affinity Equity Partners announced that an agreement has been entered into whereby AB InBev will reacquire Oriental Brewery, the leading brewer in South Korea, from KKR and Affinity for 5.8 billion USD.
This agreement returns OB to the AB InBev portfolio, after AB InBev sold the company in July 2009, following the combination of InBev and Anheuser-Busch, in support of the company's deleveraging target. AB InBev will reacquire OB earlier than July 2014, as it was originally entitled to under the 2009 transaction.
Since KKR and Affinity entered into partnership with OB in 2009, OB has grown to become the largest brewer in South Korea, driven by strong growth of the Cass brand. OB and AB InBev also remained long-term partners through OB's exclusive license to distribute select AB InBev brands in South Korea such as Budweiser, Corona and Hoegaarden.
Carlos Brito, Chief Executive Officer of AB InBev, said, "We are excited to invest in South Korea and to be working with the Oriental Brewery 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. The management team at OB has done a tremendous job of growing the business over the last few years into the leader it is in South Korea. We look forward to working with the OB team to continue to build AB InBev brands in South Korea, provide additional consumer choice and share best practices. In addition, we expect to be strong contributors to the Korean economy and community, fulfilling our global commitment to establish AB InBev as a leading corporate citizen in the markets in which we operate."
"We are proud to have partnered with Oriental Brewery these past five years," said Joseph Y. Bae, Managing Partner of KKR Asia and Kok Yew Tang, Chairman and Managing Partner of Affinity. "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."
South Korea is an attractive beer market with a strong domestic growth outlook and beer volumes that grew at an annual rate of approximately 2% between 2009 and 2012. During that same period, premium brands grew by approximately 10% per year. South Korea's beer market is expected to grow by more than 13% in total during the 2012-2022 period.[1]
Since 2006, OB has experienced significant momentum, which was accelerated under the ownership of KKR and Affinity, and Cass has become the number one beer brand in South Korea supported by a healthy consumer brand preference. AB InBev expects to build on this momentum and will apply its marketing capabilities and brand building experience to further develop OB and AB InBev brands, including Cass, OB Golden Lager, Cafri, Budweiser, Corona and Hoegaarden.
OB will continue to be led by In-soo Chang, CEO, and will remain headquartered in South Korea under its current name. OB will become a part of AB InBev's Asia Pacific Zone, led by Zone President Michel Doukeris.
The enterprise value for the transaction is 5.8 billion USD, and as a result of an agreement entered into with KKR and Affinity in 2009, AB InBev will receive approximately 320 million USD in cash at closing from this transaction, subject to closing adjustments according to the terms of the transaction. OB estimates its EBITDA in 2013 was approximately 529 billion KRW or approximately 500 million USD at current exchange rates.
The re-integration of OB into AB InBev's global platform is expected to generate benefits from a variety of sources, including maximizing OB and AB InBev's portfolios of leading beer brands to drive premium growth and realizing improved efficiencies from sharing best practices between OB and AB InBev. AB InBev's global platform also offers opportunities to export OB brands more widely.
AB InBev will draw on existing liquidity to fund the acquisition. The optimal capital structure of the company remains a Net Debt to EBITDA ratio of approximately 2.0x, with previous guidance being the achievement of a ratio below this level during the course of this year. Although this transaction does not represent a material increase in leverage, AB InBev now expects to achieve a ratio below 2.0x after the end of 2014.
The transaction is subject to regulatory approval in South Korea as well as other customary closing conditions, and is expected to close in the first half of 2014.
