InBev apparently mulls selling Korean arm and some German assets

According to the Financial Times, InBev is weighing up whether to sell their Korean beer business, Oriental Brewery, and certain brands in Germany, among other assets, as they try to find the best way to fund their purchase of U.S. brewer Anheuser-Busch.

Citing people familiar with the matter, The Financial Times newspaper in early September reported that InBev is currently reviewing sale prospects for their operations in Korea and Germany, as well as Anheuser-Busch’s entertainment division, its packaging operations, and its 27 percent stake in Chinese brewer Tsingtao.

The Korean business could sell for up to USD 2 billion. Oriental Brewery has a market share of 40 percent and sold 6.9 million hl of beer 2007, a figure that in part led sources to estimate the roughly USD 2 billion price tag. The business is South Korea’s second-largest brewer behind Hite Brewery Co Ltd. Oriental Brewery sells global brands Beck’s and Stella Artois, as well as Cass beers.

It became part of InBev’s operations in 1998 and merged with the Jinro Coors Brewery in Chungwon, South-Korea in 1999. That gave Oriental Brewery a 48 percent market share in South-Korea and a volume of about 7.5 million hl of beer per year. Only in 2004 had InBev (then Interbrew) exercised a put option and paid EUR 612 million for 100 percent control of Hops Cooperatieve U.A., which held 45 percent of the shares of Oriental Brewery. That raised InBev’s stake in Oriental to 90 percent.

InBev’s decision to sell Oriental comes at a time of high saturation in the South Korean beer market. South Korea is a relatively mature market and quite profitable, but not a significant profit driver, say market observers.

InBev would not be the first to exit the South Korean beer market: Early on, Coors saw the light, later followed by Carlsberg, which sold its remaining stake in Hite Brewery in 2006.

Deutsche Bank and JPMorgan Chase are believed to run the auction for the business. However, the auction is not likely to start until the closing of InBev’s takeover of Anheuser-Busch.

Oriental Brewery was quick to deny the rumours, saying its Belgian parent does not plan to sell the division to fund its Anheuser-Busch takeover. InBev’s spokeswoman Marianne Amssoms would not comment on Oriental’s statement, saying that it was too early to discuss specific targets.

Either it was the silly season or the hacks were away – in any case, the German media did not pick up the rumour that InBev might also sell some secondary German beer brands such as Hasseröder to finance the Anheuser-Busch deal. In Germany, InBev sits on a huge portfolio of brands that they gobbled up during their shopping spree in the early 2000s. Already InBev managed to offload a brewery and its brands that did not go anywhere to its previous owners: that was the Dinkelacker-SchwabenBräu in 2006.

Whether anybody would be willing to help InBev out of a glitch? In Germany’s low-margin market? Highly unlikely.