KKR & Co. sells back South Korea’s Oriental Brewery to its original owner for $5.8 billion

KKR & Co. is selling the Oriental Brewery located in South Korea back to its original owner Anheuser-Busch InBev. The deal is estimated to 5.8 billion dollars including the companys debt. Thanks to the agreement, the U.S. private equity group is said to be able to gain five times more money than initially invested.

Oriental Brewery was acquired by KKR & Co. in the summer of 2009 from AB InBev. The deal estimated the beer maker at 1.8 billion dollars including debt. A 50%-stake of Oriental Brewery was sold to South Korean fund Affinity Equity Partners for 400 million dollars. AB InBev, which is known as the largest brewer in the world, will get the possession of an Asian brand back while the regional beer market, which is estimated to 258 billion dollars, is growing twice as fast as the rest of the world.

Oriental Brewerys market share has increased from 40% to 60% of the local beer market under the ownership of KKR & Co. This is a great success, considering the heavy regulation, price controls and stiff taxes in South Korea. In addition, beer volumes rose by an annual rate of approximately 2% in the period between 2009 and 2012. The beer market in the country is also expected to grow by at least 13% in total until 2022.

Oriental Brewery proved that foreign private equities are able to literally do miracles for companies it invests in. This proof comes at times when most foreign buyout firms are mistrusted in Asia and are thought to be preying on local companies facing some problems for their own benefit. Currently, private equity has been experiencing some difficulties when finding bargain investments and making many multiples of the money invested.

The purchase of Anheuser Busch had just been completed by InBev, which needed to raise some cash in order to pay down its debt from the transaction. After the initial acquisition of Oriental Brewery by KKR & Co., InBev was given the option to buy the South Korean beer maker back within five years. The transaction of the Brewery was considered to be the largest and most profitable Asian investment of KKR & Co., which has started investing from its second Asia fund.

The current share price of KKR & Co. LP is $25.72, after ti settled 0.43% lower on Friday. Its one-year return rate is 5.67% up. CNNMoneys 10 analysts offering 12-month price forecasts for KKR & Co. LP have a median target of $26.50, with a high estimate of $31.00 and a low estimate of $24.00. The median estimate represents a +3.03% increase from the latest closing price.