CJ HealthCare sale fires up M&A market

By Nam Hyun-woo

The domestic mergers and acquisitions (M&A) market is heating up over the sale of CJ HealthCare, with Kolmar Korea grabbing attention as the only shortlisted strategic investor in the 1 trillion won ($934 million) deal.

According to industry sources, Morgan Stanley, the lead manager of the sale, recently shortlisted four potential buyers for a 100 percent stake in the pharmaceutical firm owned by CJ CheilJedang, and held management presentation sessions for the buyers. A management presentation is a meeting between prospective buyers and the selling company’s management.

The shortlisted buyers included three private equity funds _ CVC Capital, Carlyle, and Hahn & Company _ and Kolmar Korea, whose main businesses are cosmetics and pharmaceutical.

Apparently, Kolmar Korea is taking an aggressive approach. Korea Economic Daily, a domestic economic newspaper, reported Kolmar Korea formed a consortium with private equity firms including Mirae Asset Global Investment’s private equity department and STIC Investments.

CJ HealthCare is valued at around 1 trillion to 1.2 trillion won. The report said Kolmar Korea plans to finance half of the payment through a loan from Korea Investment & Securities and raise the remainder from the consortium.

Kolmar Korea has already posted two regulatory filings, on Dec. 15 and Jan.17, saying it is considering acquiring CJ HealthCare.

In the first nine months last year, Kolmar Korea logged 503.12 billion won in sales, up 9.78 percent from $458.3 billion won recorded in 2016 from January to September. In 2016, it posted 667.5 billion won in sales.

According to Kolmar Korea, 75 percent of its sales come from cosmetics, while 25 percent is from pharmaceuticals. Its pharmaceutical division has been showing steady growth with its compound annual growth rate standing at 18 percent from 2013 to 2016.

Especially, Kolmar Korea’s pharmaceutical sales jumped from 131.5 billion won in 2015 to 165.4 billion won in 2016, far sharper than other years.

In 2016, Kolmar Korea appointed former JW Pharmaceutical Vice President Choi Hak-bae as its pharmaceutical chief and promoted him last year as one of the co-CEOs of the company. Kolmar Korea Holdings Chairman Yoon Dong-han has also served as Daewoong Pharmaceutical vice president.

Following their focus on the drug business, Kolmar Korea signed an agreement in 2016 with Abbott Korea for the exclusive supply of two treatments for central nerve system disorders.

The question is which entity CJ would choose. Observers say regardless of which one purchases CJ HealthCare, the company will face harsh restructuring. If Kolmar Korea acquires CJ HealthCare, it would have to streamline overlapping businesses. An acquisition by a private equity firm is also expected to be followed by harsh restructuring.

In November, CJ Group announced it would put CJ HealthCare up for sale in part of the group’s restructuring effort to concentrate on its core logistics, art and culture. CJ O Shopping said earlier this month it had decided to merge with CJ E&M.