Private equity taps happy hour at Oriental Brewery

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11/12/2013 01:04

By Una Galani HONG KONG, Dec 11 (Reuters Breakingviews) - AB InBev could pay $4.1 billion to buy back the subsidiary it sold to KKR in 2009. On a back-of-the-beermat calculation OB's private equity backers could see a 34 percent annualized return. Even if the Belgium brewer abstains, local markets may support a similar valuation. Full view will be published shortly. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: www.breakingviews.com/TOPNewsSubscription ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> CONTEXT NEWS - Anheuser-Busch InBev has initiated discussions with Kohlberg Kravis Roberts to buy back South Korea's Oriental Brewery, according to local newspaper Maeil Business. - Private equity group KKR agreed to buy Oriental Brewery for $1.8 billion in May 2009 to help the Belgium brewer, formerly known as InBev, repay debt it took on to buy Anheuser-Busch. - The agreement gave AB InBev the right to reacquire OB after five years at a multiple of eleven times the previous year's EBITDA, a person familiar with the situation told Reuters Breakingviews when the deal was struck. The purchase price was roughly nine times. - KKR financed the deal using $750 million of its own equity, a $300 million payment-in-kind loan from AB Inbev with an interest rate of 8 percent, and the rest in regular loans. - In July 2009, the Financial Times reported that KKR sold half of the equity in the brewer to Affinity Equity Partners, an Asia-focused private equity firm, in return for a payment of $400 million. - Oriental Breweries has been one of KKR's best investments in Asia, Joseph Bae, the firm's managing partner for the region said at the Citi Global Financial Conference in November. - The brewer had $330 million of EBITDA, sources familiar with the brewer's financials told Reuters in January 2013. - AB InBev said it had the right but not the obligation to repurchase the asset. - Goldman Sachs, HSBC, and Nomura advised KKR on the 2009 purchase. - KKR agreement: http://media.kkr.com/media/media_releasedetail.cfm?ReleaseID=382300 (The author is a Reuters Breakingviews columnist. The opinions expressed are her own.) - For previous columns by the author, Reuters customers can click on  GALANI/  (Editing by John Foley and Katrina Hamlin) ((una.galani@thomsonreuters.com))     ((Reuters messaging: una.galani.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS ORIENTAL BREWERY