Brewer AB InBev grows in Asia with $5.8 billion Korea return

Mon Jan 20, 2014 7:24am EST
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By Stephen Aldred and Philip Blenkinsop

HONG KONG/BRUSSELS (Reuters) - Anheuser-Busch InBev SA, the world's biggest brewer, agreed to buy back South Korea's Oriental Brewery Co Ltd (OB) for $5.8 billion including debt, returning to a large Asian market at a time of strong industry growth across the region.

The sale by KKR & Co and Affinity Equity Partners will be Asia's biggest ever for private equity, excluding flotations, and rewards them with returns of more than five times their investment.

However AB InBev can claim with Monday's deal to be paying a reasonable price for a business that has grown in value in the five years since it was sold for $1.8 billion. That sale was one of the aggressive divestments forced on InBev after its $52 billion purchase of U.S. brewer Anheuser-Busch in 2008.

AB InBev shares rose 1.0 percent by 1050 GMT on Monday, making them the strongest performers in a STOXX 600 European food and beverage index, which was up 0.3 percent.

Andrew Holland, analyst at Societe Generale, said the price was pretty fair considering OB's improved profitability.

"AB InBev is looking for areas of growth faster than in its existing business," he said. Referring to the brewer's two largest markets, he added: "I'm cautious on the U.S. and there are question marks over underlying growth in Brazil beyond the World Cup and weather bounce expected in 2014."

OB, with top-selling lager Cass, has become Korea's largest brewer with a 60 percent market share. It raised its core profit (EBITDA) to some $500 million last year - 2.3 times greater than when KKR and Affinity acquired it.

Korea is a relatively mature beer market, with 40 liters drunk per capita per year, on a par with China. Growth was 2 percent per year from 2009 to 2012, and seen at a little over an annual 1 percent for the subsequent 10 years.   Continued...

View of Anheuser-Busch InBev logo outside the brewery headquarters in Leuven February 27, 2013. REUTERS/Francois Lenoir