KKR To Sell Half of Oriental Brewery to Affinity for $1.8 Billion

SEOUL/HONG KONG (Reuters) – Kohlberg Kravis Roberts & Co. has reached a deal to unload half of the equity in South Korea’s No.2 beer maker, which it agreed to buy for $1.8 billion, to Affinity Equity Partners, two sources with direct knowledge of the process said on Tuesday.

KKR is planning to complete its acquisition of Oriental Brewery (OB) from Anheuser-Busch InBev during the current quarter, the top private equity deal in the first half according to Thomson Reuters data.

KKR and Affinity would become “half-half co-investors”, although KKR would be in control of management and operations of the beer company, said one of the sources, who declined to be identified as they were not authorised to speak to the media.

The source said KKR was not short of capital but had agreed to bring in Affinity to jointly strengthen risk management at the brewery.

Citing a senior OB official, Korean online news outlet MoneyToday on Tuesday reported that the club deal was aimed at reducing the cash injection from the U.S. private equity house and sharing investment risks, as well as helping KKR buy an asset in the Netherlands.

KKR and OB officials declined to comment. Affinity could not immediately be reached for comment.

Asia-focused private equity house Affinity had competed with KKR and MBK Partners to buy OB following its smooth exits from previous South Korean acquisitions.

Last month, Reuters Basis Point reported that KKR was rumoured to be talking to a number of private equity firms, including Affinity Equity, Carlyle Group and TPG and South Korean banks to sell a stake in OB, citing an unnamed banking source.

To finance its first Korean investment, KKR had sought $825 million in acquisition financing from banks. It was also said to have an option to take $300 million in seller financing with a payment-in-kind structure from InBev, while it would fund the rest of the purchase price through equity.

(Reporting by Kim Yeon-hee in Seoul and George Chen in Hong Kong; Additional reporting by Stephen Aldred in Hong Kong; Editing by Chris Lewis)