With rumors circulating that several private equity funds expressing interest in the purchase of CJ Healthcare, employees at the pharmaceutical company have raised concerns, company insiders said Monday.

The cause of concerns -- a buyout firm may acquire it only to make a short-term profit and resell it without much investment in the business.

Local news reports said CJ Group hopes to sell the healthcare unit for around 1.5 trillion won ($1.33 billion), but there are only a few domestic drugmakers which can pay such large sum of money. Some sources said CJ Healthcare, mainly selling generics and drugs made out of chemicals, is not attractive enough to pay more than 1 trillion won.

CJ Healthcare’s buyer is likely to be one of the private equity funds owning a multinational pharmaceutical firm or with a major stake in such company, local reports said. As private equity companies go into the merger and acquisition market to make profits, their acquisition may result in uncertainty about the acquired firm’s managing continuity, a massive restructuring, or a cut in R&D investment, some say.

In South Korea, the general public puts a negative connotation to private equity funds, calling their buyout practice as “meoktwi,” or eat-and-run. The negative sentiment toward private equities took shape in particular when Lone Star Fund acquired the Korea Exchange Bank for 2.15 trillion won in 2003 and resold it for 3.9 trillion won in 2012.

Goldman Sachs’ purchase and reselling of a major stake in Kookmin Bank netted the U.S. investment firm three times the price it had paid for the purchase. KKR and Affinity’s consortium acquired local beer company OB in 2009 and resold it in five years to rake in 4 trillion won in net profit.

“I haven’t heard about any case where a private equity firm’s purchase of a local firm was helpful for the acquired firm. On the internet, what I can find about them are almost always take-the-money-and-run cases,” said a CJ Healthcare employee, who requested to be unnamed. “If a private equity fund buys our firm, there will be no R&D investment. The current R&D projects might discontinue.”

Alvogen, a U.S. generics manufacturer, has also been suffering dine-and-dash controversy, from its purchase of then-Kunwha Pharmaceutical in 2012 to the latest preparation for the delisting of now-Alvogen Korea from Kospi.

However, calling a private equity’s buyout meoktwi is not always correct, others say. Local companies, including Home Plus, Body Friend, LIG Investment & Securities, ING Life Insurance and Coway, are still in the business after they relied on private equity funds’ capital.

In the local pharmaceutical industry, it is easy to find drugmakers who have private equity funds as their owners.

Bain Capital acquired a 45.32 percent stake in Hugel, a botulinum toxin manufacturer, to become the largest shareholder of the company. KTB Private Equity secured an 8.42 percent stake in JW Pharmaceutical in 2015. IMM Private Equity acquired 50 percent share of Handok from Sanofi for 90 billion won, finally securing a 30 percent stake in Handok. Goldman Sachs in 2009 also invested 40 billion won in Geo-Young, the largest wholesaler of drugs in Korea.

sjh@docdocdoc.co.kr

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