Lotte back in race for InBev S.Korea unit: sources

By Michael Flaherty

HONG KONG (Reuters) - South Korean retail giant Lotte Group is ready to return to the fray and raise its initial offer for Oriental Brewery, which its owner Anheuser-Busch InBev INTB.BR values at more than $2 billion, in a new round of bidding due next week, sources said.

Lotte was originally seen as a top contender to buy the South Korean beer business, but its first offer was rejected, sources familiar with the matter said on Wednsday, leaving its role in the auction in doubt.

Beer would complete Lotte's product line-up, which includes popular local liquor soju and whisky. OB would give the buyer a 40 percent share of a major beer market. No.1 brewer Hite (103150.KS) has 60 percent of the market share.

The sources, who did not want to be named because they were not authorized to speak on the record about the issue, declined to say how much Lotte had bid initially or by how much it would increase its offer.

Private equity firms Affinity Equity Partners, Kohlberg Kravis Roberts & Co KKR.UL and MBK Partners are also preparing offers for the auction's second round, the sources said.

London-listed SABMiller (SAB.L), the world's second-largest brewer after AB InBev, also remains in the process, sources said, though it was unclear whether it would submit a second round bid.

Ji Ki-chang, an analyst at Tong Yang Securities in Seoul, said Lotte's initial bid was probably an attempt to buy the company as cheaply as possible.

"If OB is sold at 2 trillion won ($1.46 billion) it will be cheap," he said, adding that 2.5-3 trillion won "would be a reasonable price based on OB's business results, without consideration of foreign exchange rates."