Global Sae-A moves to sell ‘cash cow’ paper unit in full

Global Sae-A Group CI

South Korea‘s Global Sae-A Group is moving ahead with a full sale of its paper business, a deal that market sources say could be valued at around 2 trillion won ($1.4 billion).

The paper unit was folded into the group through a series of mergers and acquisitions over recent years. Although it is considered a profitable core business, the group appears to have opted for a sale to ease financial strain stemming from aggressive M&A activity across the group.

According to sources on Tuesday, Global Sae-A is currently sounding out potential buyers for the entire paper unit. The group said it is “reviewing various options, including the sale of the paper business, to enhance overall corporate value.” Assets up for sale include Tailim Packaging/Tailim Paper and Jeonju Paper/Jeonju Onepower. The combined earnings before interest, taxes, depreciation and amortization (EBITDA) of the paper businesses is estimated at roughly 200 billion won this year.

The roots of Global Sae-A lie in Sae-A Trading, one of the world’s largest original equipment manufacturing (OEM) apparel producers. Founded in 1986, Sae-A Trading supplies major European and U.S. fashion brands, including Zara, Mango and Nike.

Beyond paper, Global Sae-A has expanded aggressively through acquisitions. In 2018, it acquired the plant business of STX Heavy Industries, which was under court receivership, and established Sae-A STX Entech. In 2022, the group entered the plant and construction sectors by acquiring Valmax Technology, an engineering specialist in liquefied natural gas and hydrogen facilities, as well as Ssangyong Engineering & Construction.

As a result, Global Sae-A was designated a large business group subject to disclosure requirements—those with assets of at least 5 trillion won—from 2023.

However, Sae-A STX Entech slid into accumulated losses and entered court receivership last year. With no rehabilitation plan approved this year, the company is now undergoing liquidation. Other new businesses are also struggling. Valmax Technology posted shrinking revenue last year and logged an operating loss of 6.6 billion won and a net loss of 6.6 billion won.

The core apparel unit is also under pressure. Sae-A Trading’s standalone revenue and net profit last year fell to 1.95 trillion won and 85.9 billion won, down 16.3 percent and 49.6 percent, respectively, from two years earlier.

Deteriorating performance at major affiliates has weighed on the group’s overall financial capacity. Cash and cash equivalents at holding company Global Sae-A stood at just 5.1 billion won on a standalone basis last year.

Against this backdrop, Global Sae-A has increasingly relied on intra-group funding this year. In the first half alone, it borrowed several hundred billion won from Ssangyong E&C, Jeonju Paper and Sae-A Trading, and disclosed on Tuesday that it had taken out an additional 50 billion won loan from Ssangyong E&C.

If the sale of the paper business—considered the group’s cash cow—goes through, the inflow of trillions of won could provide much-needed breathing room for Global Sae-A’s finances.