InBev to sell Korean beer unit: sources

HONG KONG/NEW YORK Tue Sep 2, 2008 1:54pm EDT

Carlos Brito, chief executive of InBev, the world's biggest brewer, presents the company's annual results in Leuven February 28, 2008. REUTERS/Francois Lenoir

Carlos Brito, chief executive of InBev, the world's biggest brewer, presents the company's annual results in Leuven February 28, 2008.

Credit: Reuters/Francois Lenoir

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HONG KONG/NEW YORK (Reuters) - Belgian brewer InBev NV INTB.BR is planning to put its South Korean beer business up for sale, sources said on Tuesday, in an effort to shed a noncore asset and raise what could be roughly $2 billion for its purchase of U.S. brewer Anheuser-Busch Cos Inc (BUD.N).

Deutsche Bank and JPMorgan Chase will run the auction for the business, called Oriental Brewery, said the sources, who were briefed on the matter.

But the auction is not likely to start until the closing of InBev's planned $52 billion takeover of Anheuser-Busch.

InBev, set to become the world's largest brewer after the deal, has said it was considering the disposal of noncore assets.

"Financing for the combination with Anheuser-Busch includes a $7 billion bridge financing for divestitures of noncore assets from both companies," a spokeswoman for InBev said.

"However, we cannot comment at this stage on which businesses specifically would be considered," she added.

Oriental Brewery sold 6.9 million hectoliters (182.3 million gallons) of its product in 2007, a figure that in part led sources to estimate the roughly $2 billion price tag. The business is South Korea's second-largest brewer behind Hite Brewery Co Ltd 103150.KS.

JPMorgan and Deutsche Bank also advised InBev on the deal with Budweiser beer maker Anheuser, which ended in an amicable resolution after a month-long saga that had become increasingly hostile.

As in any auction, the seller could get cold feet and decide against it at any point.

Japanese brewers Kirin Holdings Co Ltd (2503.T) and Asahi Breweries Ltd (2502.T) may be among the interested bidders for the unit, sources said.

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 Cass Brewery in 2001, according to a company fact sheet.

InBev's decision to sell Oriental comes at a time of high saturation in the South Korean beer market, and after long-time speculation by analysts and experts that the Belgian brewer might spin off its Korean unit.

Weakness in Asian and European markets led to flat second-quarter earnings for InBev, as those markets offset stronger profits from North and Latin America.

The beer industry is undergoing a wave of deals, with Scottish & Newcastle Plc agreeing to be broken up by Carlsberg A/S (CARLb.CO) and Heineken NV (HEIN.AS), and SABMiller Plc (SAB.L) and Molson Coors Brewing Co (TAP.N) agreeing to merge their U.S. operations.

It also remains to be seen what InBev will do with Grupo Modelo (GMODELOC.MX), Mexico's largest brewer, which is half-owned by Anheuser. InBev is in discussions with the Mexican maker of Corona beer and has said the talks will continue for a few more weeks.

InBev in August said that U.S. antitrust regulators have asked for additional information regarding its planned acquisition of Anheuser, but added that was "a normal and expected part of the process."

InBev said it remained confident that the deal would win approval.

The brewer on Tuesday said it has completed the primary phase of syndication of the $45 billion loan backing its acquisition of Anheuser.

(Additional reporting by Philip Blenkinsop in Belgium, editing by Gerald E. McCormick)

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