February 21, 2018 / 9:02 AM / a month ago

Korea Kolmar buying CJ HealthCare for $1.2 billion; shares soar

SEOUL (Reuters) - South Korean cosmetics and pharmaceuticals contract manufacturer Korea Kolmar Co (161890.KS) beat out private equity firms for a deal to buy domestic health foods and drugmaker CJ HealthCare for $1.2 billion, sending its shares soaring on Wednesday.

Korea Kolmar said in a regulatory filing on Tuesday it agreed to buy all the shares of CJ HealthCare, which makes South Korea’s most popular anti-hangover drink ‘Condition’, from CJ Cheiljedang (097950.KS) for 1.31 trillion won ($1.22 billion).

Private equity firms including Carlyle (CG.O) and MBK Partners had been in the running for CJ HealthCare, Korea Economic Daily previously reported.

Shares in Korea Kolmar soared as much as 26.8 percent to its highest since October 2016 on Wednesday on the news, before paring gains to close up 6.6 percent, compared to a 0.6 percent rise in the wider market. .KS11

“Korea Kolmar’s pharma contract manufacturing and R&D, which has reported stable results, will be paired with the sales capability of CJ HealthCare,” said Lina Oh, analyst at eBest Investment & Securities.

Shares in seller CJ Cheiljedang, South Korea’s largest food company, closed up 2.9 percent. The deal price was higher than the market expected, which will help CJ Cheiljedang cut debt and use as a war chest for mergers and acquisitions, analysts said.

    CJ HealthCare makes over-the-counter drugs and health foods. It recorded about 500 billion won in 2017 revenue, Korea Kolmar said.

    Deutsche Bank advised Kolmar on the transaction, while Morgan Stanley advised CJ Cheiljedang.

    Reporting by Joyce Lee; Editing by Muralikumar Anantharaman

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