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By Kim Yoo-chul
Staff Reporter
Lotte Group is apparently entertaining the idea of buying two Korean liquor and beer makers, which could mean, if the two bids turn out to be successful, a major realignment of the nation's brewery industry with Lotte coming out on top.
The conglomerate, centered around the confectionery and shopping businesses, has confirmed it is interested in Doosan Corp's spirit-making affiliate, worth up to $550 million.
The group is rumored to be taking over Oriental Brewery (OB), now under the control of Belgian InBev, which recently consummated a $52 billion deal to purchase Anheuser Busch, the maker of Budwiser.
OB denied that the rumor was triggered by cash needs by its parent company that have now been resolved through other means.
Lotte spokesman Park Sang-sup said that it had submitted a bid for Doosan's liquor business.
Park, however, declined to elaborate on whether it was thinking of teaming up with other strategic investors or how much it was proposing for the purchase.
"The one thing that I can clarify is that we are looking to beef up our liquor business," Park said.
"If Lotte's affiliate Lotte Chilsung Beverage wins the battle, then it will better compete with the Hite-Jinro Group for a bigger slice of Korea's spirits market," Lee Jeong-ki, an analyst at Daishin Securities said, Monday.
"Lotte was tipped to be the strongest candidate to buy either OB or Doosan's liquor unit because of its good financial capability and business networks," Lee said, adding any deal would expand Lotte's skimpy brewery portfolio.
Korea's beer and spirits market have been controlled by the Hite-Jinro Group since 2005 after the nation's largest beer maker Hite acquired the dominant soju maker Jinro.
Soju is the country's most popular and potent liquor, and more than 3.3 billion bottles were sold last year. The average Korean adult drinks some 95 bottles a year, according to government statistics.
With a plan to reorganize itself around a holding company around heavy industries, Doosan is likely to pick a preferred negotiator this week at the earliest.
Sources said eight potential buyers including MBK Partners, Affinity Equity Partners, Citi Group's affiliate CVC and JP Morgan's affiliate CCMP are in the race for the company.
But worries are running high over Lotte's capability to seal the large-sized M&A deal as the group has "a very limited" track record.
Some analysts also say its chairman's "conservative management style" will delay the timing of synergy even if the deal is consummated.
"Doosan Group might not welcome Lotte's approach, considering its management style and passive stance over business expansion," an industry official said.
In 2005, Lotte Group's attempt to takeover Jinro was rebuffed as it only offered half the bids made by its rivals. A consortium led by Hite Brewery won the battle for the company after it offered 3.2 trillion won.
Meanwhile, Lotte has been facing a bigger challenge from MBK Partners, a private equity firm. Watchers and Doosan insiders say chances are high for MBK Partners as it will make a bigger offer.
"MBK Partners reportedly sent a team to Doosan headquarters in northern Seoul in April for a detailed check-up," the official said.
A month ago, MBK Partners agreed to acquire 100 percent of Doosan Techpack ― a manufacturer of bottles, aluminum cans and tableware, from Doosan Corp. for $300 million.
yckim@koreatimes.co.kr
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