CJ CheilJedang shares spike over 5% on plan to sell food bio division

CJ CheilJedang's shares jumped 6.41 percent on market opening to 274,000 won after it was revealed that the company is selling the green division of its bio business, which is a cash cow for the conglomerate.

CJ CheilJedang's factory in Busan [NEWS1]

CJ CheilJedang will reportedly sell its green biotech division, which accounts for 90 percent of the revenue of its bio business and is estimated to be worth between 4 trillion to 5 trillion won ($2.87 billion to $3.6 billion).

“The company is looking into strategies for its bio business but nothing has been decided on concretely as of this time,” CJ CheilJedang said in a filing with the Korea Exchange on Tuesday, after media reports on the sale came out the day before.

The bio business has been one of CJ CheilJedang’s two main drivers of growth along with its food business — its revenue of 4.13 trillion won last year accounted for 23 percent of the company's sales, ranking second after the food business, while its operating profit made up 30 percent.

The bio business consists of green, red and white divisions. The green bio division primarily focuses on producing food seasonings using microbial fermentation and extraction technology as well as amino acids for animal feed. It is the global market leader for some animal feed amino acid products such as lysine, tryptophan and valine. The white bio division develops renewable energy and materials and the red bio division produces medicine. The white and red divisions are reportedly not up for sale.

CJ CheilJedang notably expanded its green bio market share through its global retail channels during the Covid-19 pandemic, building on its technology that it has developed since the late 1980s.

CJ Cheiljedang's bio division posted 4.13 trillion won in sales in 2023, 251.3 billion won of which was operating profit.

The company chose Morgan Stanley as its financial adviser for the sale, according to a source quoted by Market Insight on Monday.

Local media reports also speculated on a possible merger and acquisition by CJ with funds from the alleged sale. The company sold CJ HealthCare, its health functional food division, for 1.3 trillion won in 2018 and used the funds to acquire U.S.-based frozen food firm Schwan’s Company in 2019. Schwan’s largely contributed to CJ’s drive in sales in the United States, especially by opening distribution networks for CJ’s Korean food brand Bibigo. CJ CheilJedang’s U.S. sales rose by 64 percent over two years from 2019 — from 3.1 trillion won in 2019 to 5.2 trillion won in 2022.

CJ CheilJedang sold its entire stake in its Brazilian subsidiary, CJ Selecta, in 2023 to invest in its biotech business. The company had said it would focus on developing high-value specialty amino acid and solution products, as well as for improving operational efficiency.

The company said in its Tuesday filing that it would file an additional report regarding its bio business either within a month or after the details of its next step are decided upon.

CJ CheilJedang's stock price ended at 270,500 won on Tuesday, up 5.05 percent, or 13,000 won, than the previous trading session. Its biotech arm, CJ Bio, jumped 29.94 percent to 11,370 won.

Update, Nov. 19: Added information about biotech business structure, past sales by CJ CheilJedang.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]