[THE INVESTOR] Cosmetics contract manufacturer Kolmar Korea said on Feb. 21 that it will acquire CJ HealthCare, the pharmaceutical arm of CJ Group, in a deal worth 1.3 trillion won (US$1.29 billion).

Kolmar submitted the highest bid to beat out Carlyle Group, CVC Capital and Hahn & Co. 

Founder and Chairman Yoon Dong-han aims to transform his company into one of Korea’s top 5 drug makers by 2020 by converging cosmetics, pharmaceutical and health supplement businesses the two companies run. Kolmar said it would keep the CJ workforce intact even after the acquisition.

CJ HealthCare’s expertise in areas such as intravenous solutions, generic drugs and hangover cures would help Kolmar to dive deeper into the pharma business as it has been focusing on providing contract manufacturing services to cosmetics and pharma firms rather than developing its own products.

“The takeover deal will enable Kolmar to cover conventional pharma and health beverage sectors. In the long run, business diversification and securing a distribution network nationwide are the key factors,” said NH Investment & Securities analyst Han Kook-hee.

The combined revenue of both firms was 1.3 trillion won last year while only three drug makers here including Yuhan, GC Pharma and Kwang Dong Pharmaceutical posted sales exceeding 1 trillion won.

CJ HealthCare’s three production sites will bolster Kolmar’s manufacturing capacity at its two plants in Sejong and Jecheon.

By Park Han-na (hnpark@heraldcorp.com)