* Lotte won't submit final bid for OB-source
* Final round of offers due Friday-sources
* Three private equity firms in the running-sources
* Financing critical to getting deal done
(Adds details on lenders, background, byline)
By Michael Flaherty
HONG KONG, April 17 (Reuters) - South Korean retailer Lotte Group will not submit a final offer for Oriental Brewery (OB), a source close to the deal said on Friday, opening the way for a private equity buyer for the country's No. 2 beer company.
The source, along with another source with direct knowledge of the matter, said Anheuser-Busch InBev, the world's largest brewer and the owner of OB, is accepting final offers on Friday for its South Korean brewer, which it values at more than $2 billion.
Private equity firms Affinity Equity Partners, Kohlberg Kravis Roberts & Co and MBK Partners, backed by teams of bank lenders across Asia, are expected to submit final bids for OB, the sources said. The sources did not want to be identified because they were not authorised to speak on the record.
Lotte's original offer for OB was lower than InBev wanted, sources have said previously, but the retailer later came forward with a revised bid.
That too was rejected, the source close to the deal said on Friday, prompting the company to bow out of the final round.
Analysts and bankers saw Lotte as a front-runner to buy OB. The company has a lot of cash on hand, plus beer would complete Lotte's product line-up, which includes popular local liquor soju and whisky.
The sources close to the deal said other strategic buyers had been interested, but the deal now comes down to the three private equity firms.
AB-InBev has committed to selling non-core assets, with a $7 billion loan due in November which was part of the $45 billion in borrowing InBev took out last year to buy U.S. brewer Anheuser-Busch.
JPMorgan and Deutsche Bank are running the OB sale process.
DOWN TO FINANCING
With three private equity firms in the hunt, analysts and bankers have questioned whether the firms can get proper financing in this tough banking climate to afford the $2 billion price tag.
Buyout firms typically pay one-third in cash for a deal and borrow the rest.
With Goldman Sachs as an adviser, KKR has JPMorgan, Standard Chartered, and HSBC among its financial backers, as well as Calyon, ING Bank, Natixis and Nomura, Reuters Basis Point reported.
Affinity has Citigroup as an adviser and financial backer, along with Hana Financial, Korea Exchange Bank, National Agricultural Cooperative Federation, Natixis and Woori Bank, according to Basis Point.
MBK is being advised by Morgan Stanley and has Hana and Korea Development Bank behind it, Basis Point said.
All firms named either declined to comment or could not immediately be reached. (Additional reporting by Kim Yeon-hee and Basis Point; Editing by Jon Loades-Carter)