By Stephen Aldred, Soyoung Kim and Denny Thomas
HONG KONG/NEW YORK (Reuters) - Anheuser-Busch InBev SA is in advanced discussions to buy South Korea's Oriental Brewery from private equity owners KKR & Co LP and Affinity Equity Partners for more than $4.5 billion, according to people familiar with the matter.
The parties are hammering out final terms of what would be one of Asia's biggest ever private equity transactions with the aim to reach an agreement before the end of January, the people said.
The potential purchase by the world's biggest brewer comes amid upbeat prospects for beer consumption in Asia, with the region's $258 billion market growing twice as fast as the rest of the world.
Discussions on the sale are continuing but they could still fall apart and there is no guarantee a deal will be struck, the people cautioned, asking not to be named because the matter is not public. If final terms are agreed, a deal could come as early as next week, one person added.
AB InBev, KKR and Affinity declined to comment. Oriental Brewery could not be immediately reached for comment.
AB InBev sold Oriental Brewery to KKR for $1.8 billion in 2009. That sale was part of InBev's efforts to raise money to ease the debt burden from its acquisition of U.S. beer maker Anheuser-Busch a year earlier.
KKR later sold half of the equity stake in Oriental Brewery to Affinity.
Under the 2009 deal, AB InBev has the right, but not the obligation, to buy back Oriental Brewery on predetermined financial terms within five years after the closing of the transaction, a period that expires in July this year.
The agreement allows KKR to sell Oriental Brewery back to AB InBev for around 11 times earnings before interest, taxes, depreciation and amortization (EBITDA), according to the people familiar with the matter.
OB, as the brewer is known, reported EBITDA of around $400 million in its last financial statement, posted at the end of 2012. The brewer cut costs, increased cash flows and gained market share under KKR's ownership to become South Korea's biggest brewer.
A successful deal would represent the biggest-ever Asian exit for KKR and Affinity.
Rapid growth in Asia's beer market has drawn global brewers to the region. Carlsberg, Heineken NV and SABMiller Plc have all struck deals in Asia over the past five years to offset sluggish sales in mature markets.
As a result, beer-related M&A in Asia has commanded rich premiums, with global companies paying up to buy companies to either get a foothold in fast growing markets or to protect their turf from home grown competitors.
Heineken NV paid $6.4 billion for control of Tiger beer maker Asia Pacific Breweries Ltd in 2012, translating into a multiple of 35 times earnings.
AB InBev has a relatively small presence in Asia Pacific, with the region accounting for 14.3 percent of the 403 million hectoliters of beer it sold and 2.5 percent of its $15.5 billion in EBITDA, according to most recent company filings.
"The option to buy back was struck in 2009 when the world looked a much bleaker place. And I suspect that the agreed buy-back multiple looks very attractive in today's world," said Bernstein Research analyst Trevor Stirling.
AB InBev has been keen on South and Central American growth and last year it acquired its remaining shares of Mexico's Modelo Grupo for $20.1 billion.
Oriental Brewery's only domestic rival Hite Jinro, which has lost market share to Oriental Brewery in the last few years, trades at an EV/EBITDA multiple of 12.74 times (CHK), according to Thomson Reuters data.
The Oriental Brewery-Hite duopoly controls 90 percent of South Korea's beer market.
Oriental Brewery's growth and the prospect of a bumper return has boosted fundraising efforts of both private equity owners.
KKR last year raised a $6 billion Asia fund, the region's biggest ever, while Affinity has just closed a $3.8 billion fourth fund, according to a person with knowledge of the matter. Affinity's new fund is the biggest ever raised by an Asian firm outside Australia.
(Reporting by Stephen Aldred, Denny Thomas in Hong Kong and Soyoung Kim in New York,; Editing by Steve Orlofsky and Andrew Hay)