Zuellig mulls acquiring S.Korea’s top drug distributor Geo-Young

Asia’s leading drug distributor Zuellig Pharma is considering the acquisition of Geo-Young Corp., the largest medicine wholesaler in South Korea, sources familiar with the matter said on Wednesday.

The seller of Geo-Young is asking around 2 trillion won ($1.5 billion) for a 100% stake, sources added.

Geo-Young’s largest shareholder is its holding company Cho Sunhae GY Holdings Co., with 91.17% ownership.

US alternative asset manager Blackstone Inc., via its subsidiary SHC Golden L.P., owns a 71.25% stake in the holding firm. Geo-Young’s co-founder and Chairman Cho Sun-hae a 21.99% stake, while the other co-founder and Honorary Chairman Lee Hee-koo owns 6.76% in the holding company.

Geo-Young controls about 80% of the domestic medicine and medical device distribution market. It posted 2.86 trillion won in revenue and 60.2 billion won in operating profit last year.

Since the financial investor Blackstone acquired the drug distributor at 1.1 trillion won in 2019, Geo-Young has bulked up through bolt-on acquisitions.

In 2020, Geo-Young purchased Duchembio Co., a domestic radiography device maker for diagnosing different forms of cancer, Alzheimer's disease and Parkinson’s disease. In June this year, it bought a 25% stake in Baek Je Pharmaceutical Co.

Blackstone sent requests for proposals to investment banks to select underwriters to divest Geo-Young shares earlier this year.

Zuellig was founded in 1922 in Switzerland and has a strong market power in Asia. Its Singapore office is providing drugs, medical devices and diagnostics to 13 Asian countries, including Korea, Taiwan, Vietnam, the Philippines, Indonesia, Thailand and Cambodia.   

During the pandemic, the company significantly expanded its cold storage warehouse capacity in Asian markets to provide COVID-19 vaccines.

Zuellig founded a Korean affiliate in 1997, which posted 885.2 billion won in revenue and 1.4 billion won in net profit last year. The affiliate is the third-largest medicine wholesaler in Korea in terms of revenue, following Geo-Young and Baek Je Pharmaceutical Co.

The key to closing the deal is on Geo-Young co-founders’ will to maintain their leadership roles in the company.

Chairman Cho has expressed her willingness to control the company, according to market insiders. If she hopes to continue her management rights over the medicine wholesaler, the current shareholders are likely to choose a financial investor like a private equity firm as a buyer, rather than a strategic investor such as a pharmaceutical company, sources added.

Write to Jun-Ho Cha at chacha@hankyung.com

Jihyun Kim edited this article.