Deutsche Bank Tops Korean Merger Advisory on Anheuser-Busch Deal

Apr 20, 2014 9:14 pm ET

April 21 (Bloomberg) -- Anheuser-Busch InBev NV’s $5.8 billion purchase of Oriental Brewery Co. has vaulted Deutsche Bank AG to the top of South Korea’s merger league table, putting the firm on course for a record advisory year in the country.

Deutsche Bank acted on $8 billion of takeovers involving the nation’s companies this year, boosted by its guidance of Leuven, Belgium-based Anheuser-Busch through the country’s biggest merger of 2014, data compiled by Bloomberg show. Morgan Stanley is second with $7.8 billion, followed by Citigroup Inc.’s $7.7 billion, the data show.

South Korean mergers surged this year amid improved prospects for economic growth and as troubled affiliates from STX Group to Tongyang Group were taken over by creditors swapping their debt for equity. The value of acquisitions involving South Korean companies jumped 40 percent in the first quarter from a year earlier to $27.9 billion, the most since at least 1995, according to the data.

“We were lucky having the Oriental Brewery deal, which was unusually big,” Ahn Sung Eun, Deutsche Bank’s chief country officer for Korea, said in an April 16 interview in Seoul. “Even excluding that, the deal flow is clearly showing an upward trend with demand for corporate restructuring and companies looking for new growth engines.”

Nick Footitt, a Hong Kong-based spokesman for Morgan Stanley, had no immediate comment, according to a text message reply to Bloomberg questions.

“We expect M&A activities to remain strong in 2014, driven by multiple themes, including cross border, both inbound and outbound, private-equity acquisitions and exits, and corporate restructuring and business realignment situations,” Jangho Park, Head of Citigroup Global Markets Korea Securities Ltd., said by e-mail on April 18.

KKR, Carlyle

Anheuser-Busch, the world’s biggest beermaker, completed its purchase of Oriental Brewery, South Korea’s largest brewer, from KKR & Co. and Affinity Equity Partners Ltd. on April 1. The transaction allowed Anheuser-Busch to regain control of a company it first sold to KKR in 2009.

Deutsche Bank also advised private-equity firm Carlyle Group LP this year on its $1.93 billion acquisition of Tyco International Ltd.’s fire and security services business in South Korea. The Frankfurt-based firm acted for KB Financial Group Inc.’s purchase of a leasing and consumer-credit unit from Woori Finance Holdings Co.

The German bank’s 2014 merger dealflow in South Korea is already more than 10 times the $745 million it advised on last year, when it was the 13th-ranked adviser, data compiled by Bloomberg show.

“With a couple of mega deals, we have seen our best-ever performance so far this year,” said Ahn, who is also chief executive officer of Deutsche Securities Korea Co. “I wish we could achieve the $10-billion mark this year.”

Troubled Shipbuilder

The largest deal of the year after Oriental Brewery was the acquisition of STX Offshore & Shipbuilding Co. by its creditors in a debt-to-equity swap worth $4.5 billion, the data show. The South Korean shipbuilder, based in Changwon city, sought a debt restructuring with creditors last year as it was sold by parent STX Group amid collapsing demand for new vessels.

Ahn, 52, returned to Deutsche Bank in July as chief country officer after working as head of Korean investment banking at Bank of America Corp.’s Merrill Lynch unit since 2004, according to a profile provided by the German firm. Before that, he was head of investment banking at Deutsche Securities Korea for two years.

Deutsche Bank’s takeover advisory business in South Korea had boosted headcount by 70 percent since Ahn rejoined the company, he said, declining to provide specific numbers.

The German company, which opened an office in South Korea in 1978, has more than 350 employees at its three units in the country, according to a fact sheet provided by the firm.

Looser Rules

Buyout funds will play a key role in the evolution of South Korea’s merger industry as they fuel demand for acquisitions and provide liquidity needed for the deals, Ahn said. Government plans to strengthen the industry and deregulate private equity will give “positive signals” to potential acquirers and sellers, according to Ahn.

The Financial Services Commission said in November it would deregulate and streamline rules on private-equity funds as part of wider plans to bolster competitiveness in the financial industry. South Korea is also seeking to loosen takeover regulations as the country’s market remains small compared to developed nations, Finance Minister Hyun Oh Seok said on March 5.

The nation’s economy is poised to grow 4 percent this year, Bank of Korea Governor Lee Ju Yeol said April 10, faster than the central bank’s previous target of 3.8 percent and last year’s 3 percent. The expansion will pick up to near potential and the Bank of Korea may consider lifting interest rates when demand starts to drive inflation, Lee said.