South Korea'sNew PE Age?: KKR's buyout of Oriental Brewery has renewed confidence for private-equity investment in South Korea, despite the military moves of its northern neighbor

Preeminent buyout firm Kohlberg Kravis Roberts scouted for buyout deals in South Korea for years before agreeing last month to purchase Oriental Brewery from Anheuser-Busch InBev for $1.8 billion. The delay could be one of the smartest moves the firm has made in the last decade.

More importantly, the transaction - announced weeks before North Korea unleashed an underground nuclear blast and threatened further missile launches - heralds an opening for renewed private-equity dealmaking in South Korea, where LBO transactions took a back seat to strategic M&A in the last few years.

Additionally, a large syndicate of banks that includes HSBC, JPMorgan, Nomura and Standard Chartered has emerged to finance OB's acquisition, which gives KKR control of the country's second largest beer maker behind Hite Brewery Company Ltd., and the right for OB to distribute Budweiser, BudIce and Hoegaarden beers in South Korea.

"It's not only watershed in ushering in a new era for private equity in South Korea, it's also significant in the number of structuring nuances in the transaction, including the offering of seller paper plus a formulaic provision for InBev to repurchase the business from KKR," says Stewart Kim, the managing partner of Los Angeles investment bank PGP Capital Advisors LLC.

Indeed. Following the KKR deal, some large South Korean companies have broached the idea of raising capital through stake sales, including to private investment firms.

Diversified industrial conglomerate Doosan Corp. announced on Wednesday, for example, that it would sell interests in certain divisions, valued at more than $632 million, to Asian private-equity firms Mirae Asset PEF and IMM Private Equity.

KKR's purchase is different from other U.S. buyout firm investments that took place in the early part of the new millennium in South Korea, which were turnaround gambles on distressed Korean institutions.

Nat Zilkha, a director in Kohlberg Kravis'Menlo Park, Calif., office, says the OB transaction couldn't be more different. "We're buying what we believe is a very strong, healthy and efficiently run company with a management team that we support," he says, adding, "Our thesis for OB is one of growth, as opposed to cost-cutting."