South Korea: Hite Brewery Co., signed a $3.4 billion to buy Jinro Ltd.

A group led by South Korea's largest beer maker, Hite Brewery Co., has entered on June 3 a $3.4 billion deal to buy country's largest distiller Jinro Ltd. The deal will be the largest acquisition ever in South Korea.

Jinro controls more than half of South Korea's market for the traditional drink "soju" estimated at $2 billion, and the acquisition is expected to provide Hite, 25 percent owned by Denmark's Carlsberg, with a dominant position in both beer and soju markets, Reuters commented.

Hite said in a filing to the Korea Exchange that the purchase price was set at 3.43 trillion won ($3.39 billion). The final deal value has slightly increased from the 3.41 trillion won Hite offered, following an adjustment to details by the local court which approved the deal, a company spokesman said. "Three trillion won will be used to pay off debt and the remainder will be spent on helping normalise Jinro's operation," Hite said in a statement.

The value of the acquisition is worth nearly double Hite's $1.8 billion market capitalisation but was lower than a previous estimate of some $3.6 billion by Goldman Sachs, a major Jinro creditor.

Goldman placed the liquor distiller in court receivership in May 2003 on charges of mismanagement, making it the first South Korean company put into receivership by a foreign firm. Hite said it would seek to list Jinro on local and overseas exchanges by 2007, without providing further details.

South Korea's antitrust body has been examining the purchase and could torpedo the deal if it believes it would result in excessive market control. The review deadline is set for mid-August.

The Hite-led consortium, which includes a military savings fund, a teachers' pension fund and the investment arm of state-run Korea Development Bank, signed a preliminary deal in early April after beating out foreign and local investors including a Citigroup venture capital group, U.S.-based fund Newbridge Capital and JPMorgan Partners.

Before the Jinro deal, the biggest acquisition in South Korea was Standard Chartered's $3.3 billion purchase of Korea First Bank. The deal puts the value of Jinro at around 19 times its projected earnings for 2005. Doosan Co., a smaller rival that also bid for Jinro, is valued at seven times its projected earnings for this year.

Shares in Hite rose 0.85 percent to end at 95,300 won, compared with a 0.54 percent gain in the broader market. ($1=1013.0 Won)

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