DEALTALK-Lots of Lotte interest in S. Korea brewer OB

lunes 12 de enero de 2009 08:26 CET

By Michael Flaherty and Yeon-hee Kim

HONG KONG/SEOUL Jan 12 (Reuters) - South Korean retail giant Lotte Group, fresh from a deal to buy a local liquor business, is looking to gulp down another beverage group within its borders.

After a tough start, the auction of South Korean beermaker Oriental Brewery (OB) is about to begin, and Lotte is gearing up to bid, sources with direct knowledge of the matter say.

OB, South Korea's second largest beer maker, could fetch around 1.5 trillion won ($2 billion).

While Lotte has long been viewed as a likely suitor for OB, it's in an even better position now, analysts and bankers say. In addition to its recent efforts to expand the company's drinks business, Lotte has lots of cash on hand.

"It is Lotte only that can afford that amount of money in the current economic climate," said Jin Yoo of Goodmorning Shinhan Securities. Lotte Group has 3 trillion to 4 trillion won in free cash, including proceeds from the 2006 IPO of Lotte Shopping (023530.KS: Cotización), the analyst said.

Yoo said that given Lotte's existing grip on the lower-margin soft drinks business, entering a higher-margin segment with beer and soju liquor makes sense.

Nailing down an exact price for OB will not be easy. Anheuser-Busch InBev INTB.BR, the world's largest brewer, owns a majority stake in OB but the company is unlisted.

One way to value it is by looking at Hite Brewery 103150.KS, South Korea's No.1 beer maker. Hite is valued at 11.5 times forecast earnings, according to Thomson Reuters data.   Continuación...