[At a Crossroads] Shinpoong Faces Five Consecutive Years of Losses as Sale Stalls for Seventh Month

Negotiations Delayed Due to High 'Management Control Premium' Demands
Poor Performance and Failed Investments...
Challenges Ahead in Overcoming Management Crisis

The sale process for Shinpoong, a KOSPI-listed company, has been facing difficulties for seven months. Although many potential buyers have expressed interest in acquiring the company, it is reported that negotiations have stalled over conditions such as price. Meanwhile, Shinpoong's losses continue to accumulate.

According to the Financial Supervisory Service's electronic disclosure system on June 27, Shinpoong announced that it has been continuously reviewing proposals for a stock transfer contract that would result in a change of the largest shareholder. However, the company disclosed that nothing has been concretely finalized as of now.

Previously, on November 26 of last year, Shinpoong had disclosed in response to a Korea Exchange inquiry regarding significant market fluctuations that the largest shareholder was reviewing a proposal to sell their stake. Seven months have passed since then, but the sale has still not been completed.

According to the investment banking industry, Jung Hakheon, the chairman of Shinpoong and its largest shareholder, is considering selling about 30% of shares held by himself and his family, along with management rights. This includes a 3% stake that Chairman Jung converted from a borrowed-name account to his real name last year. The 4.1% stake held by special affiliate Changgang Foundation is excluded from the sale.

The delay in the sale is analyzed to be due to disagreements over price conditions. Industry sources say that Chairman Jung's side is seeking 40 billion to 50 billion KRW for the 30% stake. Considering Shinpoong's market capitalization as of the previous day was 39 billion KRW, this means they are seeking a premium of about 300% on a stake worth 12 billion KRW at market value.

In the market, there is a view that it is difficult to pay such a high premium given that Shinpoong has been in the red for five consecutive years and its stock price remains low. Last year, Shinpoong posted consolidated sales of 22.8 billion KRW and an operating loss of 4.4 billion KRW. The cumulative operating loss over five years amounts to 27 billion KRW. In the first quarter of this year, the company also recorded sales of 5.8 billion KRW and an operating loss of 900 million KRW, continuing its deficit.

Shinpoong's original name was 'Shinpoong Paper,' and it was founded in 1960. Its main business was the manufacturing of white cardboard, but in 2019, the Pyeongtaek plant was expropriated by Korea Land and Housing Corporation (LH) as part of the Godeok Internationalization District Development Project, leading to the suspension of its business. Although the plant could have been relocated, negotiations with the government over compensation were delayed, causing setbacks such as selling off alternative sites twice. The paper manufacturing business that was suspended at the time accounted for 135 billion KRW in sales, which was 87% of Shinpoong's total revenue.

Afterward, Shinpoong operated only in paper distribution and sales, while also venturing into new businesses such as imported car sales and F&B. However, the imported car division exited the business at the end of 2023 after terminating its dealer contract, and the shabu-shabu restaurant operated by the F&B division also closed its Apgujeong location due to declining performance, relocating to Lotte Department Store in Jamsil.

Businesses promoted through subsidiaries also resulted in large losses. As of the end of 2023, Shinpoong had invested 15 billion KRW in subsidiaries, of which 13.4 billion KRW was recognized as impairment loss. Specifically, this included 6.5 billion KRW for SPMotors, 6 billion KRW for Trebio, and 900 million KRW for KkumuiSilhyeon1331. Among these, Trebio was sold in March last year, with Shinpoong disposing of its entire 70% stake at a loss for 1.2 billion KRW. Ironically, Trebio suddenly posted an operating profit of 2.5 billion KRW last year, turning a profit.

A Shinpoong representative stated, "The main business of paper distribution is not large in scale, so it is difficult to generate profit due to fixed costs, and new businesses and investments are also not proceeding smoothly," adding, "We are working to derive a mutually satisfactory agreement in the sale process."