Korea: Hite Brewery to acquire liquor distiller Jinro

South Korea's antitrust regulator conditionally approved on Wednesday, July 21, a plan by a consortium led by Hite Brewery Co., the country's largest beer producer, to acquire domestic liquor distiller Jinro Ltd, according to Asia Pulse.

The decision-making committee of the Fair Trade Commission ruled that the Hite consortium be permitted to buy Jinro on the condition that it must not raise the price of all its alcoholic beverages beyond gains in national consumer prices for the next five years.

The watchdog also stated that the two companies are required to maintain existing and wholly independent marketing personnel for the cited period and submit a detailed plan that outlines the brewery's commitment not to use its strengthened market presence to exert unfair agreements on companies that its has dealing with.

The ruling also called for the consortium to submit the detailed plan to the FTC within three months of time. In addition, Hite and Jinro must report on their inventory levels every half of the year during the five-year period.

If Hite and its partners accept the conditions set by the antitrust regulator the latest decision is expected to pave the way for a reorganization of South Korea's alcohol market.

Hite currently enjoys a 58 percent share of the South Korean beer market and Jinro controls close to 56 percent of the local soju business. Soju is a popular distilled liquor enjoyed by many South Koreans.

The consortium also includes domestic funds such as the Military Mutual Aid Association, the Korean Teachers' Credit Union and the Industrial Bank of Korea.

The consortium signed a 3.4 trillion won (US$3.27 billion) agreement with Jinro on June 3 after being selected as the primary negotiation partner for the takeover in early April. The deal is the largest merger in the Korean corporate history.

Jinro, established in 1924, has been under a court receivership after it came close to insolvency due to heavy debts incurred prior to the 1997-98 Asian financial crisis.

Following the decision, an FTC official said the regulatory body decided to allow the takeover because the beer and soju could be considered as separate markets even if they fall under the same overall business area. If beer and soju are deemed as being different and do not overlap each other, the merger cannot be seen as promoting a monopoly, the official said.