The bidding war to acquire CJ HealthCare is heating up, with the highest bid price reportedly offered at 1.4 trillion won ($1.3 billion).
According to pharmaceutical sources, four companies are seeking to buy out CJ HealthCare in bidding managed by Morgan Stanley. The four are one drugmaker, Kolmar Korea, and three private equity firms -- Hahn & Co., CVC Capital, and Carlyle Group.
Hahn & Co. reportedly made the highest offer at 1.4 trillion won, and the other three, about 1 trillion won, each.
Industry watchers said Hahn & Co. or Kolmar Korea, which showed a strong will to take over the drugmaker, are likely to become a preferred bidder.
Established in 2010, Hahn & Co. manages more than 3 trillion won capital. The private equity firm has invested in diverse fields such as IT, consumer goods, transportation, and logistics. The companies that received investment from Hahn & Co. include Coway Holdings, Ssangyong Cement, Hanjin Shipping, Woongjin Foods, and Mable.
Although Hahn & Co. does not have experience in pharmaceutical investment, the firm made Coway Holdings become the first Korean company to be listed on the Stock Exchange of Hong Kong. Hahn & Co. might try to enlarge the size of CJ HealthCare or list it on the Korean stock market or overseas, observers said.
Kolmar Korea is another strong candidate. Focusing on original development manufacturing (ODM) of cosmetics and pharmaceutical goods, the company has been seeking opportunities to engage in pharmaceutical business.
Yoon Dong-han, founder, and chairman of Kolmar Korea, once worked for Daewoong Pharmaceuticals and has been expressing a strong commitment to acquisition of CJ HealthCare immediately after the drugmaker was put on sale. If he succeeds, Kolmar Korea and CJ HealthCare could create synergy effects, pushing up their combined revenues to reach 1 trillion won.
However, employees at CH HealthCare are raising concerns that a private equity fund might acquire the company only to make a short-term profit and resell it without much investment in the business. They also worry that Kolmar Korea might try to cut workforce after an acquisition.
“On a scenario that our company is acquired by Kolmar Korea, I doubt whether some office employees at CJ HealthCare can keep their jobs whose work overlaps with those in Kolmar Korea. As Kolmar Korea has some limitations in cash flow, there might be an early retirement program (ERP),” an insider of CJ HealthCare said on the condition of anonymity.
Another CJ HealthCare official said, “I’m worried about an acquisition by a private equity, too. A private equity might try to sell our company in pieces, business by business. Maintaining the employment is the biggest issue for workers.”
CJ HealthCare ranked 12 among pharmaceutical firms in sales in 2016, with its annual revenue amounting to 520.8 billion won, and operating profit, 67.9 billion won. Although its 2017 sales slightly fell to 513.7 billion won, operating profit rose 19.88 percent to 81.7 billion won, according to the company’s preliminary estimates.
<© Korea Biomedical Review, All rights reserved.>