Editor's Viewpoint - Anheuser-Busch InBev Chases Efficiencies From Oriental, But Where?
Anheuser-Busch InBev's plan to buy back Oriental Brewery serves as the strongest indictment yet of the rude health the global brewer is currently in.
Earlier today (20 January), the Belgium-headquartered company confirmed the rumours: It will reacquire South Korea's Oriental from private equity group Kohlberg Kravis Roberts & Co (KKR) and Affinity Equity for US$5.8bn. A-B InBev sold the unit to KKR in 2009 for $1.8bn, as it embarked on a de-leveraging programme, introduced to help pay back a $7bn bridge loan taken out to help finance InBev's $52bn acquisition of Anheuser-Busch in 2008.
That's a pretty tidy profit for KKR, huh? By my calculations ... that's ... hang on ... $4bn.
Before we start drafting our begging letters to the private equity group, though, consider this: In 2009, A-B InBev was in clear need of the funds to pay off its loan. Less than five years later, the brewer is now in a position to “draw on existing liquidity to fund the acquisition”.
How's that for a turnaround?
Hats should be doffed in KKR's and Affinity's direction, meanwhile, for driving Oriental in the five years since they closed the acquisition to overtake Hite Brewery as the largest brewer in South Korea.
One thing puzzles, however: Considering the M.O. of private equity – buy it, strip costs to the bone, sell it – how does A-B InBev realistically expect to “realise improved efficiencies” post-purchase?
There can't be that many efficiencies left to be had, surely?
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