Giant New York private equity firm KKR, founded by Henry Kravis and George Roberts, bought the Oriental Brewery of South Korea in 2009 for US$1.8 billion, or OB as it is known locally, subsequently laying off a half interest to Hong Kong based Affinity Equity Partners, led by Chairman Kok Yew Tang.
Today, January 20th, 2014, the two private equity firms have announced they are selling 100% of the brewery again, this time for US$5.8 billion. The kicker is that they are selling the company back to global beer producer Anheuser-Busch InBev who had sold it to them in the first place.
This is said to be the largest ever private equity exit in the Asian marketplace.
Giant Belgian and Brazilian brewer InBev had purchased the American Anheuser Busch business in 2008, in a huge US$52 billion transaction, deploying substantial amounts of financial leverage to do so at the time. Accordingly, they sold the Korean brewery off to the private equity interests not long afterwards to help keep their debt load manageable.
Henry Kravis and George Roberts
With recovering business conditions and a firmer balance sheet today, AB Inbev are now buying it back almost five years later, and both KKR and Aiffinity are cashing in with a tremendous over 300% profit. Under the terms of the original sales agreement AB InBev had the right to buy the company back up until July 2014, on a formula basis, and is now exercising that right several months early. The price has gone up so dramatically, even with EBITDA valuation multiples very similar to when KKR originally bought it, as KKR and its Affinity partner simply did a great job of growing the profits of the business under their ownership.
Since acquisition under the KKR and Affinity partnership Oriental Brewery became the largest brewery in South Korea, driven by strong growth of its domestic Cass brand. It is worth noting in case you should go there that all Korean domestic beers are brewed from rice rather than barley as is done in the West. After the sale too KKR AB InBev also remained a long-term partner through Oriental Brewery’s continuing exclusive license to distribute selected regular 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.”
“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.”
Joseph Y. Bae, Managing Partner of KKR Asia and Kok Yew Tang, Chairman and Managing Partner of Affinity said, “We are proud to have partnered with OB these past five years.”…“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.”
Oriental brewery south Korea
About Anheuser-Busch InBev
Anheuser-Busch InBev is a multinational brewing company based in Leuven Belgium. It is the world’s largest beer producing company with close to a 25% global market shares. 14 of the company’s brands each separately gross over US$1 billion a year in revenues. AB InBev employs over 110, 000 people in over 30 countries in the world.
Once InBev had acquired the St. Louis based Anheuser-Busch, about 45% of its sales immediately became derived from North America. Even though today it is formally a Belgian constituted company, with a strong Brazilian component, it reports its financial statements in US dollars. AB InBev has a listing on the New York Stock Exchange as well for its American Depositary Receipts (ADRs), in addition to the primary listing of its shares on Euronext.
InBev itself had been the result of a previous round of consolidation between Belgian and Brazilian brewing companies. In 2012, AB InBev had global revenues of almost US$40 billion. One of InBev’s Belgian predecessor companies first started making beer in Leuven in 1366, and Anheuser-Busch only much later – in 1852. The company strives today to be what it calls the “Best Beer Company in a Better World”.
Founded in 1976 by Henry Kravis and George Roberts, KKR is a New York Stock Exchange listed global investment firm with more than US$90 billion in assets under management.
KKR is publicly traded on the New York Stock Exchange (NYSE:KKR).
About Affinity Equity Partners
Affinity currently advises and manages about US$8 billion of funds and assets, making it one of the largest independent private equity firms in the region. Affinity currently operates out of offices in Hong Kong, Singapore, Seoul, Sydney, Beijing and Jakarta, Brussels and Hong Kong.