Anheuser-Busch InBev (AB InBev) will likely buy back Oriental Brewery (OB) this year, a source who is familiar with ongoing negotiations, told The Korea Times Sunday.
Kohlberg Kravis Roberts (KKR) and Affinity Equity Partners (AEP), each hold a 50-percent stake in OB.
The two private equity funds want $4.15 billion but the source said the final price could be around $4 billion.
''KKR and AEP will likely dispose of OB by July this year,’’ he said. ''They are in the final stages of negotiating the price with InBev.’’
In July 2009, AB InBev sold OB to KKR and AEP for $1.8 billion.
Under their contract, AB InBev retained the right to buy back OB within five years by July 2014.
''AB InBev was selected as a preferred bidder last year and has since been conducting due diligence on the beer maker. Normally, the preferred bidder is announced publicly, but both parties wanted to proceed with the sale of OB behind the scenes,’’ the source said.
An OB spokesman said that he had no knowledge about the deal.
''The 2009 contract states that AB InBev can reacquire OB at 11 times the company’s EBITA, which is estimated at 400 billion won ($377 million). This puts the sales prices at 4.4 trillion won ($4.15 billion),’’ he explained about the range of the buyback price.
EBITA is earnings before the deduction of interest, tax and amortization expenses, a financial indicator widely used as a measure of efficiency and profitability.
AB InBev has been seeking to cut the sales price, thinking that $4.15 billion is too high for OB.
But KKR has been arguing that OB is fairly valued at $4.15 billion, saying the company has significantly improved its bottom line over the past five years.
Under the leadership of CEO Jang In-soo, OB reclaimed the No.1 spot here in 2011, 15 years after it ceded the crown to archrival Hite.
Its revenue jumped to 1.26 trillion won in 2012 from 816 billion won in 2009, with its net profit soaring to 266 billion won from 127 billion won over the four-year period.
''KKR and AEP think that OB is not the same company as it was under AB Inbev. At the end of the day, they will have to lower the price to conclude the deal because no one else appears to be interested in buying OB,’’ the source said. ''I think the price will be adjusted lower to $4 billion.’’
Lotte Chilsung, one of Korea’s largest soju makers, and KT&G, the largest tobacco manufacturer, were rumored to be interested in the brewer.
But they reportedly backed out because of the high sales price. Lotte, instead, announced a plan to build a brewery to enter the beer market.
