Bling meets K-pop: LVMH fund invests in Psy producer YG
(Reuters) – The private equity arm of French luxury goods giant LVMH (LVMH.PA) will invest up to $80 million in South Korea’s YG Entertainment Inc (122870.KQ), which manages a stable of K-pop performers including “Gangnam Style” rapper Psy.
The investment is one of the biggest bets by a global fund in the “Korean Wave” of culture, including music, TV shows and consumer products like cosmetics, that has grown in popularity in Asia and globally. The move could also help accelerate YG’s push into fashion.
YG and LVMH, the world’s largest luxury goods maker, are also in talks for a strategic partnership, said Eai-Jin Song, who heads YG’s investor relations team, declining to elaborate.
YG has previously said it will launch a joint venture fashion brand with Samsung Group fashion unit Cheil Industries this quarter. YG is also expected to enter the cosmetics business, partnering with China’s Huanya Group and local makeup manufacturer Coson Co Ltd (069110.KQ), analysts have said.
“I expect the investment would enable YG to enter the fashion industry. YG will be able to leverage its performers to expose and market fashion products,” said Hong Jung-pyo, an analyst at Kiwoom Securities.
L. Capital Asia will invest 61 billion won ($60 million) in new preferred shares of YG and is in talks to buy another $20 million in shares from Yang Hyun-suk, the former K-pop star who founded YG and is its largest shareholder, according to a YG filing. It will become YG’s second-largest shareholder.
YG is one of South Korea’s three main K-pop talent agencies, with acts including Big Bang and 2NE1 and a market value of $690 million as of Wednesday’s closing.
“It hasn’t been that long that South Korean cultural projects have shown profit, but returns are improving and foreign investors are showing more interest, especially for success cases like YG,” James Park, director-general at the Korea Venture Capital Association, said last week.
LVMH and YG have worked together before.
When YG-managed rapper-producer G-Dragon, a member of Big Bang and a fashion icon, released his solo album in 2009, LVMH’s Louis Vuitton was the clothing sponsor, the first time the luxury brand backed a South Korean singer.
Shares in YG had lost more than half their value from a 2012 peak before local media last week reported a possible investment by LVMH’s funding arm, as investor concerns about the continued profitability from K-pop deflated previous bullish valuations.
However, it has been more proactive at diversifying beyond music than rival management agencies S.M. Entertainment (041510.KQ) and JYP Entertainment Corp.
Shares in YG rose 3.1 percent, beating a 0.1 drop in the wider KOSDAQ .KQ11, ahead of Wednesday’s announcement, and are up 13 percent since reports of the possible investment.
Yang has been a judge on talent search show K-Pop Star since 2011 and has led YG’s nascent expansion into actor management. YG’s artists are often seen as having a high level of creative control by the heavily produced standards of K-pop.
Earlier this month, Chinese internet portal Sohu.com (SOHU.O) invested 15 billion won in South Korean talent agency Keyeast Co Ltd (054780.KQ) through a subsidiary, becoming its second-largest shareholder. Keyeast manages Kim Soo-hyun, one of the stars of blockbuster K-drama “My Love from the Star.”
YG Entertainment to sell $60 mln shares to LVMH-sponsored capital
By Kim Eun-jung
SEOUL, Aug. 20 (Yonhap) — YG Entertainment Corp., South Korea’s high-brand entertainment agency who has Psy as its client, said Wednesday it will sell new shares worth 61 billion won (US$69.7 million) to the investment fund arm of French luxury group LVMH, a move seen as paving the way for expanding its fashion business globally.
YG Entertainment said it will issue 1.35 million convertible preferred shares, which are priced at 44,900 won, through a third-party allotment with L Capital Asia, the Asian trading arm of LVMH. The preferred stocks can be converted into common stocks a year later.
“(The stake sale) is aimed at long-term development and entry into new business,” the company said in a regulatory filing without giving further details.
Once the breeding ground of hip-hop musicians, YG Entertainment has grown into one of the top three record companies in South Korea, featuring big-name K-pop stars including Psy, Big Bang and 2NE1.
The announcement came amid speculation that the Seoul-based management agency is in talks with the French luxury house to enter the global fashion business as it has been putting more resources into fashion and consumer brand development.
The company, which is known for bold, extravagant fashion style, is set to launch a new fashion brand, NONA9ON, next month in collaboration with Cheil Industries, Samsung Group’s fashion division.
The brand will feature fashion icons G-Dragon of Big Bang and CL of 2NE1 as models to target trend-savvy youngsters, the company said earlier.
Last year, YG Entertainment teamed up with China’s No. 3 cosmetics firm Guangzhou Huanya Cosmetics Technology and Korean cosmetics manufacturer COSON to start a beauty business in the world’s most populous nation.
The possible collaboration with LVMH, known for luxury brand Louis Vuitton, was seen as part of its “one-source, multi-use” strategy to diversify its revenue sources.
“YG Entertainment has already launched a joint venture with Cheil Industries for a new clothing brand, but joining hands with the French luxury group will certainly upgrade it’s global brand image, which is a boost to the company in the long term,” said Kim Chang-kwon, an entertainment analyst at KDB Daewoo Securities Co.
Its shares closed at 46,000 won at the secondary-KOSDAQ market on Wednesday, up 3.14 percent from the previous session. The new share announcement was made after the market closed.
Credits: Global Post